ServisFirst Bancshares, Inc. 10-Q

sfbs20230630_10q.htm   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q     (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023   ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the transition period from _______to_______   Commission file number 001-36452   SERVISFIRST BANCSHARES, INC. (Exact Name of Registrant as Specified in Its Charter)   Delaware 26-0734029 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)   2500 Woodcrest Place , Birmingham , Alabama 35209 (Address of Principal Executive Offices) (Zip Code)   ( 205 ) 949-0302 (Registrant's Telephone Number, Including Area Code)   Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol(s) Name of each exchange on which registered Common stock, par value $.001 per share SFBS New York Stock Exchange     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐   Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒ No ☐   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):   Large accelerated filer  ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company  ☐ Emerging growth company ☐   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No ☒   Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.   Class Outstanding as of July 31, 2023 Common stock, $.001 par value 54,423,341                                                               TABLE OF CONTENTS     PART I. FINANCIAL INFORMATION 4   Item 1. Consolidated Financial Statements 4   Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations        28   Item 3. Quantitative and Qualitative Disclosures about Market Risk 44   Item 4. Controls and Procedures 45         PART II. OTHER INFORMATION 45   Item 1. Legal Proceedings 45   Item 1A. Risk Factors 46   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46   Item 3. Defaults Upon Senior Securities 46   Item 4. Mine Safety Disclosures 46   Item 5. Other Information 46   Item 6. Exhibits 46   EX-3.1 SECOND CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION EX-3.2 RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED EX-31.01 SECTION 302 CERTIFICATION OF THE CEO EX-31.02 SECTION 302 CERTIFICATION OF THE CFO EX-32.01 SECTION 906 CERTIFICATION OF THE CEO EX-32.02 SECTION 906 CERTIFICATION OF THE CFO                             3     PART 1. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS     SERVISFIRST BANCSHARES, INC.   CONSOLIDATED BALANCE SHEETS   (In thousands, except share and per share amounts)                         June 30, 2023     December 31, 2022       (Unaudited)       (1)   ASSETS                 Cash and due from banks   $ 107,251     $ 106,317   Interest-bearing balances due from depository institutions     852,483       708,221   Federal funds sold     17,958       1,515   Cash and cash equivalents     977,692       816,053   Available-for-sale debt securities, at fair value     990,921       644,815   Held-to-maturity debt securities (fair value of $ 963,843 at June 30, 2023 and $ 935,953 at December 31, 2022)     1,057,306       1,034,121   Restricted equity securities     7,307       7,734   Mortgage loans held for sale     3,981       1,607   Loans     11,604,894       11,687,968   Less allowance for credit losses     ( 152,272 )     ( 146,297 ) Loans, net     11,452,622       11,541,671   Premises and equipment, net     59,655       59,850   Accrued interest and dividends receivable     50,183       48,422   Deferred tax asset, net     65,635       60,448   Other real estate owned and repossessed assets     832       248   Bank owned life insurance contracts     290,979       287,752   Goodwill and other identifiable intangible assets     13,615       13,615   Other assets     102,080       79,417   Total assets   $ 15,072,808     $ 14,595,753   LIABILITIES AND STOCKHOLDERS' EQUITY                 Liabilities:                 Deposits:                 Non-interest-bearing demand   $ 2,855,102     $ 3,321,347   Interest-bearing     9,433,117       8,225,458   Total deposits     12,288,219       11,546,805   Federal funds purchased     1,298,066       1,618,798   Other borrowings     64,737       64,726   Accrued interest and dividends payable     23,061       18,615   Other liabilities     35,254       48,913   Total liabilities     13,709,337       13,297,857   Stockholders' equity:                 Preferred stock, par value $ 0.001 per share; 1,000,000 authorized and undesignated at June 30, 2023 and December 31, 2022     -       -   Common stock, par value $ 0.001 per share; 200,000,000 shares authorized: 54,425,033 shares issued and outstanding at June 30, 2023; and 54,326,527 shares issued and outstanding at December 31, 2022     54       54   Additional paid-in capital     230,659       229,693   Retained earnings     1,190,920       1,109,902   Accumulated other comprehensive loss     ( 58,662 )     ( 42,253 ) Total stockholders' equity attributable to ServisFirst Bancshares, Inc.     1,362,971       1,297,396   Noncontrolling interest     500       500   Total stockholders' equity     1,363,471       1,297,896   Total liabilities and stockholders' equity   $ 15,072,808     $ 14,595,753      (1) Derived from audited financial statements. See Notes to Consolidated Financial Statements.   4       SERVISFIRST BANCSHARES, INC.   CONSOLIDATED STATEMENTS OF INCOME   (In thousands, except per share amounts)   (Unaudited)                                         Three Months Ended     Six Months Ended       June 30,     June 30,       2023     2022     2023     2022   Interest income:                                 Interest and fees on loans   $ 171,718     $ 111,287     $ 335,450     $ 214,392   Taxable securities     11,570       10,515       22,465       18,738   Nontaxable securities     17       37       38       80   Federal funds sold     227       93       841       106   Other interest and dividends     6,124       4,623       12,184       6,427   Total interest income     189,656       126,555       370,978       239,743   Interest expense:                                 Deposits     71,971       6,427       127,684       12,270   Borrowed funds     16,434       3,760       33,742       5,383   Total interest expense     88,405       10,187       161,426       17,653   Net interest income     101,251       116,368       209,552       222,090   Provision for credit losses     6,654       9,507       10,851       14,869   Net interest income after provision for credit losses     94,597       106,861       198,701       207,221   Noninterest income:                                 Service charges on deposit accounts     2,142       2,133       4,076       4,275   Mortgage banking     696       614       1,138       1,140   Credit card income     2,406       2,672       4,095       5,044   Securities losses     -       ( 2,833 )     -       ( 6,168 ) Bank-owned life insurance income     2,496       3,733       4,117       5,341   Other operating income     842       3,187       1,477       7,822   Total noninterest income     8,582       9,506       14,903       17,454   Noninterest expenses:                                 Salaries and employee benefits     18,795       20,734       37,861       39,035   Equipment and occupancy expense     3,421       2,983       6,856       5,916   Third party processing and other services     6,198       6,345       13,482       11,950   Professional services     1,580       1,327       3,234       2,319   FDIC and other regulatory assessments     2,242       1,147       3,759       2,279   OREO expense     6       32       12       35   Other operating expenses     6,224       7,253       12,926       15,505   Total noninterest expenses     38,466       39,821       78,130       77,039   Income before income taxes     64,713       76,546       135,474       147,636   Provision for income taxes     11,245       14,410       24,035       27,887   Net income     53,468       62,136       111,439       119,749   Preferred stock dividends     31       31       31       31   Net income available to common stockholders   $ 53,437     $ 62,105     $ 111,408     $ 119,718                                     Basic earnings per common share   $ 0.98     $ 1.14     $ 2.05     $ 2.21   Diluted earnings per common share   $ 0.98     $ 1.14     $ 2.04     $ 2.20     See Notes to Consolidated Financial Statements.   5       SERVISFIRST BANCSHARES, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   (In thousands)   (Unaudited)                                         Three Months Ended     Six Months Ended       June 30,     June 30,       2023     2022     2023     2022   Net income   $ 53,468     $ 62,136     $ 111,439     $ 119,749   Other comprehensive loss, net of tax:                                 Unrealized net holding losses arising during period from securities available for sale, net of tax of $( 5,182 ) and $( 5,403 ) for the three and six months ended June 30, 2023, respectively, and $( 5,557 ) and $( 12,572 ) for the three and six months ended June 30, 2022, respectively     ( 15,455 )     ( 13,344 )     ( 16,122 )     ( 40,340 ) Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax of $( 51 ) and $( 96 ) for the three and six months ended June 30, 2023, respectively, and $( 100 ) and $( 250 ) for the three and six months ended June 30, 2022, respectively     ( 158 )     ( 377 )     ( 287 )     ( 946 ) Reclassification adjustment for net losses on sales of securities, net of tax of $ 595 and $ 1,295 for the three and six months ended June 30, 2022     -       2,238       -       4,873   Other comprehensive loss, net of tax     ( 15,613 )     ( 11,482 )     ( 16,409 )     ( 36,413 ) Comprehensive income   $ 37,855     $ 50,654     $ 95,030     $ 83,336     See Notes to Consolidated Financial Statements.                                 6       SERVISFIRST BANCSHARES, INC.   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY   (In thousands, except share amounts)(Unaudited)                                                                         Three Months Ended June 30,       Common Shares     Preferred Stock     Common Stock     Additional Paid-in Capital     Retained Earnings     Accumulated Other Comprehensive Income (Loss)     Noncontrolling interest     Total Stockholders' Equity   Balance, April 1, 2022     54,282,132     $ -     $ 54     $ 227,127     $ 956,169     $ ( 10,875 )   $ 500     $ 1,172,975   Common dividends declared, $ 0.23 per share     -       -       -       -       ( 12,491 )     -       -       ( 12,491 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       32       -       -       32   Issue restricted shares pursuant to stock incentives, net of forfeitures     15,794       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     8,949       -       -       308       -       -       -       308   2,551 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 326 )     -       -       -       ( 326 ) Stock-based compensation expense     -       -       -       797       -       -       -       797   Other comprehensive loss, net of tax     -       -       -       -       -       ( 11,482 )     -       ( 11,482 ) Net income     -       -       -       -       62,136       -       -       62,136   Balance, June 30, 2022     54,306,875     $ -     $ 54     $ 227,906     $ 1,005,815     $ ( 22,357 )   $ 500     $ 1,211,918                                                                     Balance, April 1, 2023     54,398,025     $ -     $ 54     $ 229,631     $ 1,152,681     $ ( 43,049 )   $ 500     $ 1,339,817   Common dividends declared, $ 0.28 per share     -       -       -       -       ( 15,239 )     -       -       ( 15,239 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       41       -       -       41   Issue restricted shares pursuant to stock incentives, net of forfeitures     16,555       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     10,453       -       -       168       -       -       -       168   2,247 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 122 )     -       -       -       ( 122 ) Stock-based compensation expense     -       -       -       982       -       -       -       982   Other comprehensive loss, net of tax     -       -       -       -       -       ( 15,613 )     -       ( 15,613 ) Net income     -       -       -       -       53,468       -       -       53,468   Balance, June 30, 2023     54,425,033     $ -     $ 54     $ 230,659     $ 1,190,920     $ ( 58,662 )   $ 500     $ 1,363,471     7         Six Months Ended June 30,       Common Shares     Preferred Stock     Common Stock     Additional Paid-in Capital     Retained Earnings     Accumulated Other Comprehensive Income (Loss)     Noncontrolling interest     Total Stockholders' Equity   Balance, January 1, 2022     54,227,060     $ -     $ 54     $ 226,397     $ 911,008     $ 14,056     $ 500     $ 1,152,015   Common dividends paid, $ 0.23 per share     -       -       -       -       ( 12,485 )     -       -       ( 12,485 ) Common dividends declared, $ 0.23 per share     -       -       -       -       ( 12,491 )     -       -       ( 12,491 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       65       -       -       65   Issue restricted shares pursuant to stock incentives, net of forfeitures     42,768       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     37,047       -       -       862       -       -       -       862   10,953 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 940 )     -       -       -       ( 940 ) Stock-based compensation expense     -       -       -       1,587       -       -       -       1,587   Other comprehensive loss, net of tax     -       -       -       -       -       ( 36,413 )     -       ( 36,413 ) Net income     -       -       -       -       119,749       -       -       119,749   Balance, June 30, 2022     54,306,875     $ -     $ 54     $ 227,906     $ 1,005,815     $ ( 22,357 )   $ 500     $ 1,211,918                                                                     Balance, January 1, 2023     54,326,527     $ -     $ 54     $ 229,693     $ 1,109,902     $ ( 42,253 )   $ 500     $ 1,297,896   Common dividends paid, $ 0.28 per share     -       -       -       -       ( 15,233 )     -       -       ( 15,233 ) Common dividends declared, $ 0.28 per share     -       -       -       -       ( 15,239 )     -       -       ( 15,239 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       82       -       -       82   Issue restricted shares pursuant to stock incentives, net of forfeitures     37,268       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     61,238       -       -       1,014       -       -       -       1,014   26,462 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 1,838 )     -       -       -       ( 1,838 ) Stock-based compensation expense     -       -       -       1,790       -       -       -       1,790   Other comprehensive loss, net of tax     -       -       -       -       -       ( 16,409 )     -       ( 16,409 ) Net income     -       -       -       -       111,439       -       -       111,439   Balance, June 30, 2023     54,425,033     $ -     $ 54     $ 230,659     $ 1,190,920     $ ( 58,662 )   $ 500     $ 1,363,471     See Notes to Consolidated Financial Statements.   8       SERVISFIRST BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)     Six Months Ended June 30,       2023     2022   OPERATING ACTIVITIES                 Net income   $ 111,439     $ 119,749   Adjustments to reconcile net income to net cash provided by operations                 Deferred tax     312       424   Provision for credit losses     10,851       14,869   Depreciation     2,142       2,098   Accretion on acquired loans     98       70   Amortization of core deposit intangible     -       23   Amortization of investments in tax credit partnerships     6,540       5,857   Net amortization of debt securities available-for-sale     226       2,062   Increase in accrued interest and dividends receivable     ( 1,761 )     ( 1,726 ) Stock-based compensation expense     1,790       1,587   Increase (decrease) in accrued interest and dividends payable     4,446       ( 104 ) Proceeds from sale of mortgage loans held for sale     51,674       17,835   Originations of mortgage loans held for sale     ( 52,910 )     ( 19,032 ) Loss on sale of securities available for sale     -       6,168   Gain on sale of mortgage loans held for sale     ( 1,138 )     ( 1,140 ) Net gain on sale of other real estate owned and repossessed assets     ( 5 )     ( 239 ) Write down of other real estate owned and repossessed assets     -       6   Increase in cash surrender value of life insurance contracts     ( 4,117 )     ( 5,341 ) Net change in other assets, liabilities, and other operating activities     ( 36,094 )     ( 17,167 ) Net cash provided by operating activities     93,493       125,999   INVESTMENT ACTIVITIES                 Purchases of debt securities available-for-sale     ( 414,056 )     ( 76,360 ) Proceeds from maturities, calls and paydowns of debt securities available-for-sale     46,203       64,459   Proceeds from sale of debt securities available-for-sale     -       75,036   Purchases of debt securities held-to-maturity     ( 48,723 )     ( 648,266 ) Proceeds from maturities, calls and paydowns of debt securities held-to-maturity     25,155       44,271   Purchases of restricted equity securities     ( 12,750 )     ( 423 ) Proceeds from sale of restricted equity securities     13,177       -   Investment in tax credit partnerships and SBIC     ( 5,817 )     ( 1,646 ) Return of capital from tax credit partnerships and SBIC     -       249   Decrease (increase) in loans     77,363       ( 1,088,455 ) Purchases of premises and equipment     ( 1,947 )     ( 1,280 ) Proceeds from sale of other real estate owned and repossessed assets     158       1,091   Net cash used in investing activities     ( 321,237 )     ( 1,631,324 ) FINANCING ACTIVITIES                 Net decrease in non-interest-bearing deposits     ( 466,245 )     ( 113,256 ) Net increase (decrease) in interest-bearing deposits     1,207,659       ( 567,243 ) Net decrease in federal funds purchased     ( 320,732 )     ( 322,610 ) FHLB advances     300,000       -   Repayment of FHLB advances     ( 300,000 )     -   Proceeds from exercise of stock options     1,014       862   Taxes paid in net settlement of tax obligation upon exercise of stock options     ( 1,838 )     ( 940 ) Dividends paid on common stock     ( 30,444 )     ( 24,957 ) Dividends paid on preferred stock     ( 31 )     ( 31 ) Net cash provided by (used in) financing activities     389,383       ( 1,028,175 ) Net increase (decrease) in cash and cash equivalents     161,639       ( 2,533,500 ) Cash and cash equivalents at beginning of period     816,053       4,222,096   Cash and cash equivalents at end of period   $ 977,692     $ 1,688,596   SUPPLEMENTAL DISCLOSURE                 Cash paid/(received) for:                 Interest   $ 156,980     $ 10,291   Income taxes     46,968       35,965   Income tax refund     -       ( 142 ) NONCASH TRANSACTIONS                 Other real estate acquired in settlement of loans   $ 737     $ 857   Dividends on nonvested restricted stock reclassified as compensation expense     41       65   Dividends declared     15,239       12,491     See Notes to Consolidated Financial Statements.   9     SERVISFIRST BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2023 (Unaudited)     NOTE 1 - GENERAL   The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S- X and the instructions for Form 10 -Q, and have not been audited. These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) and its consolidated subsidiaries, including ServisFirst Bank (the “Bank”), may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10 -K for the year ended December 31, 2022.   All reported amounts are in thousands except share and per share data.     NOTE 2 - CASH AND CASH EQUIVALENTS   Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.     NOTE 3 - EARNINGS PER COMMON SHARE   Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. The difference in earnings per share under the two -class method was not significant for both the three and six month periods ended June 30, 2023 and 2022.     10         Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022       (In Thousands, Except Shares and Per Share Data)   Earnings per common share                                 Weighted average common shares outstanding     54,411,016       54,295,789       54,385,775       54,279,574   Net income available to common stockholders   $ 53,437     $ 62,105     $ 111,408     $ 119,718   Basic earnings per common share   $ 0.98     $ 1.14     $ 2.05     $ 2.21                                     Weighted average common shares outstanding     54,411,016       54,295,789       54,385,775       54,279,574   Dilutive effects of assumed exercise of stock options and vesting of performance shares     94,710       236,596       134,250       247,668   Weighted average common and dilutive potential common shares outstanding     54,505,726       54,532,385       54,520,025       54,527,242   Net income available to common stockholders   $ 53,437     $ 62,105     $ 111,408     $ 119,718   Diluted earnings per common share   $ 0.98     $ 1.14     $ 2.04     $ 2.20           NOTE 4 - SECURITIES   The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2023 and December 31, 2022 are summarized as follows:               Gross     Gross               Amortized     Unrealized     Unrealized     Fair       Cost     Gain     Loss     Value   June 30, 2023   (In Thousands)   Debt Securities Available-for-Sale                                 U.S. Treasury Securities   $ 414,470     $ 47     $ ( 63 )   $ 414,454   Government Agency Securities     4       -       -       4   Mortgage-backed securities     261,450       2       ( 31,510 )     229,942   State and municipal securities     13,409       1       ( 1,447 )     11,963   Corporate debt     385,673       -       ( 51,115 )     334,558   Total   $ 1,075,006     $ 50     $ ( 84,135 )   $ 990,921   Debt Securities Held-to-Maturity                                 U.S. Treasury Securities   $ 557,084     $ -     $ ( 34,258 )   $ 522,826   Mortgage-backed securities     492,170       1       ( 58,302 )     433,869   State and municipal securities     8,052       -       ( 904 )     7,148   Total   $ 1,057,306     $ 1     $ ( 93,464 )   $ 963,843                                     December 31, 2022                                 Debt Securities Available-for-Sale                                 U.S. Treasury Securities   $ 3,002     $ -     $ ( 33 )   $ 2,969   Government Agency Securities     9       -       -       9   Mortgage-backed securities     282,480       5       ( 32,782 )     249,703   State and municipal securities     15,205       1       ( 1,597 )     13,609   Corporate debt     406,680       -       ( 28,155 )     378,525   Total   $ 707,376     $ 6     $ ( 62,567 )   $ 644,815   Debt Securities Held-to-Maturity                                 U.S. Treasury Securities   $ 507,151     $ -     $ ( 36,197 )   $ 470,954   Mortgage-backed securities     518,929       7       ( 60,960 )     457,976   State and municipal securities     8,041       -       ( 1,018 )     7,023   Total   $ 1,034,121     $ 7     $ ( 98,175 )   $ 935,953     The amortized cost and fair value of debt securities as of June 30, 2023 and December 31, 2022 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.   11         June 30, 2023     December 31, 2022       Amortized Cost     Fair Value     Amortized Cost     Fair Value       (In Thousands)   Debt securities available-for-sale                                 Due within one year   $ 449,651     $ 448,911     $ 24,712     $ 24,432   Due from one to five years     31,741       29,817       58,554       57,092   Due from five to ten years     329,164       280,122       338,630       311,100   Due after ten years     3,000       2,129       3,000       2,488   Mortgage-backed securities     261,450       229,942       282,480       249,703       $ 1,075,006     $ 990,921     $ 707,376     $ 644,815                                     Debt securities held-to-maturity                                 Due within one year   $ 122,152     $ 120,402     $ 250     $ 250   Due from one to five years     314,773       297,631       386,465       366,095   Due from five to ten years     128,211       111,941       128,477       111,632   Mortgage-backed securities     492,170       433,869       518,929       457,976       $ 1,057,306     $ 963,843     $ 1,034,121     $ 935,953     All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.   Restricted equity securities are comprised entirely of restricted investment in Federal Home Loan Bank stock for membership requirements.   The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law as of June 30, 2023 and December 31, 2022 was $ 1.3 billion and $ 789.3 million, respectively. The increase in pledged investment is due to increases in public funds balances during the second quarter of 2023.   The following table identifies, as of June 30, 2023 and December 31, 2022, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.       Less Than Twelve Months     Twelve Months or More     Total       Gross             Gross             Gross               Unrealized             Unrealized             Unrealized               Losses     Fair Value     Losses     Fair Value     Losses     Fair Value       (In Thousands)   June 30, 2023                                                 Debt Securities available-for-sale                                                 U.S. Treasury Securities   $ ( 63 )   $ 214,652     $ -     $ -     $ ( 63 )   $ 214,652   Government Agency Securities     -       4       -       -       -       4   Mortgage-backed securities     ( 19 )     1,097       ( 31,490 )     228,603       ( 31,510 )     229,700   State and municipal securities     ( 24 )     2,176       ( 1,423 )     9,342       ( 1,447 )     11,518   Corporate debt     ( 6,118 )     69,657       ( 44,996 )     258,041       ( 51,115 )     327,698   Total   $ ( 6,225 )   $ 287,586     $ ( 77,910 )   $ 495,986     $ ( 84,135 )   $ 783,572   Debt Securities held-to-maturity                                                 U.S. Treasury Securities   $ ( 6 )   $ 49,020     $ ( 34,252 )   $ 473,806     $ ( 34,258 )   $ 522,826   Mortgage-backed securities     ( 621 )     10,241       ( 57,681 )     419,852       ( 58,302 )     430,093   State and municipal securities     -       -       ( 904 )     6,898       ( 904 )     6,898   Total   $ ( 627 )   $ 59,261     $ ( 92,836 )   $ 900,556     $ ( 93,464 )   $ 959,817   December 31, 2022                                                 Debt Securities available-for-sale                                                 U.S. Treasury Securities   $ ( 33 )   $ 2,969     $ -     $ -     $ ( 33 )   $ 2,969   Government Agency Securities     -       9       -       -       -       9   Mortgage-backed securities   $ ( 3,473 )   $ 60,234     $ ( 29,309 )   $ 189,109     $ ( 32,782 )   $ 249,343   State and municipal securities     ( 186 )     5,283       ( 1,411 )     7,880       ( 1,597 )     13,163   Corporate debt     ( 18,566 )     304,254       ( 9,589 )     63,411       ( 28,155 )     367,666   Total   $ ( 22,258 )   $ 372,749     $ ( 40,309 )   $ 260,400     $ ( 62,567 )   $ 633,149   Debt Securities held-to-maturity                                                 U.S. Treasury Securities   $ ( 12,662 )   $ 295,383     $ ( 23,537 )   $ 175,570     $ ( 36,197 )   $ 470,953   Mortgage-backed securities     ( 31,367 )     278,746       ( 29,592 )     174,842       ( 60,960 )     453,588   State and municipal securities     ( 544 )     4,443       ( 474 )     2,330       ( 1,018 )     6,773   Total   $ ( 44,573 )   $ 578,572     $ ( 53,603 )   $ 352,742     $ ( 98,175 )   $ 931,314       12     At June 30, 2023 and 2022, no allowance for credit losses has been recognized on available-for-sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available for sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts.  Historical loss rates associated with securities having similar grades as those in our portfolio have generally not been significant. Furthermore, as of June 30, 2023 and 2022, there were no past due principal or interest payments associated with these securities. Based upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for held-to-maturity State and Municipal Securities as such amount is not material at June 30, 2023 and 2022. All debt securities in an unrealized loss position as of June 30, 2023 continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.   The following table summarizes information about sales of debt securities available-for-sale.       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022       (In Thousands)   Sale proceeds   $ -     $ 33,425     $ -     $ 75,036   Gross realized gains   $ -     $ -     $ -     $ -   Gross realized losses     -       ( 2,833 )     -       ( 6,168 ) Net realized gain (loss)   $ -     $ ( 2,833 )   $ -     $ ( 6,168 )       NOTE 5 – LOANS   The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by the Bank with the Federal Deposit Insurance Corporation (FDIC).   Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.   Real estate – construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.   Owner-occupied commercial real estate mortgage – Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.   1 - 4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.   Other real estate mortgage – Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.   13     Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.   The following table details the Company’s loans at June 30, 2023 and December 31, 2022:       June 30,     December 31,       2023     2022       (Dollars In Thousands)   Commercial, financial and agricultural   $ 2,986,453     $ 3,145,317   Real estate - construction     1,397,732       1,532,388   Real estate - mortgage:                 Owner-occupied commercial     2,294,002       2,199,280   1-4 family mortgage     1,167,238       1,146,831   Other mortgage     3,686,434       3,597,750   Subtotal: Real estate - mortgage     7,147,674       6,943,861   Consumer     73,035       66,402   Total Loans     11,604,894       11,687,968   Less: Allowance for credit losses     ( 152,272 )     ( 146,297 ) Net Loans   $ 11,452,622     $ 11,541,671                                       Commercial, financial and agricultural     25.73 %     26.91 % Real estate - construction     12.04 %     13.11 % Real estate - mortgage:                 Owner-occupied commercial     19.77 %     18.82 % 1-4 family mortgage     10.06 %     9.81 % Other mortgage     31.77 %     30.78 % Subtotal: Real estate - mortgage     61.59 %     59.41 % Consumer     0.63 %     0.57 % Total Loans     100.00 %     100.00 %   The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan credit portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:     ● Pass – loans which are well protected by the current net worth and paying capacity of the borrower (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.   ● Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.   ● Substandard – loans that exhibit well-defined weakness or weaknesses that currently jeopardize debt repayment. These loans are characterized by the distinct possibility that the company will sustain some loss if the weaknesses are not corrected.   ● Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.   14     The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of June 30, 2023 :       2023     2022     2021     2020     2019     Prior     Revolving Loans     Revolving lines of credit converted to term loans     Total       (In Thousands)   Commercial, financial and agricultural                                                                   Pass   $ 188,322     $ 452,817     $ 274,416     $ 175,236     $ 232,062     $ 524,756     $ 1,031,315     $ 5,827     $ 2,884,751   Special Mention     1,209       2,018       5,105       6,327       1,969       13,801       17,946       -       48,375   Substandard - accruing     -       -       -       374       10,853       24,514       9,783       -       45,524   Substandard -Non-accrual     -       452       146       -       2,101       3,211       1,894       -       7,804   Total Commercial, financial and agricultural   $ 189,531     $ 455,287     $ 279,667     $ 181,937     $ 246,985     $ 566,282     $ 1,060,937     $ 5,827     $ 2,986,453   Current-period gross charge-offs     -       4,677       -       -       -       446       492       -       5,615                                                                             Real estate - construction                                                                         Pass   $ 50,354     $ 646,738     $ 235,612     $ 36,480     $ 7,935     $ 17,850     $ 401,532     $ -     $ 1,396,501   Special Mention     -       -       -       -       -       200       19       -       219   Substandard - accruing     -       -       -       -       -       1,011       1       -       1,012   Total Real estate - construction   $ 50,354     $ 646,738     $ 235,612     $ 36,480     $ 7,935     $ 19,061     $ 401,552     $ -     $ 1,397,732                                                                             Owner-occupied commercial                                                                         Pass   $ 27,570     $ 362,863     $ 208,803     $ 306,095     $ 188,247     $ 384,494     $ 768,636     $ 1,741     $ 2,248,449   Special Mention     5,386       1,187       840       7,715       8,679       2,816       6,851       -       33,474   Substandard - accruing     -       -       -       -       -       3,498       3,074       -       6,572   Substandard -Non-accrual     -       -       -       -       2,332       -       3,175       -       5,507   Total Owner-occupied commercial   $ 32,956     $ 364,050     $ 209,643     $ 313,810     $ 199,258     $ 390,808     $ 781,736     $ 1,741     $ 2,294,002   Current-period gross charge-offs     -       -       -       -       117       -       -       -       117                                                                             1-4 family mortgage                                                                         Pass   $ 46,213     $ 391,730     $ 209,540     $ 96,218     $ 63,229     $ 121,505     $ 224,137     $ 69     $ 1,152,641   Special Mention     -       4,710       1,080       1,193       237       1,204       2,108       -       10,532   Substandard - accruing     -       -       -       -       3       541       442       -       986   Substandard -Non-accrual     -       -       422       733       1,152       773       -       -       3,080   Total 1-4 family mortgage   $ 46,213     $ 396,440     $ 211,042     $ 98,144     $ 64,621     $ 124,023     $ 226,686     $ 69     $ 1,167,238   Current-period gross charge-offs     -       40       -       -       -       -       -       -       40                                                                             Other mortgage                                                                         Pass   $ 23,499     $ 881,657     $ 444,982     $ 397,700     $ 260,033     $ 414,557     $ 1,234,081     $ 12,321     $ 3,668,830   Special Mention     -       -       -       -       -       1,050       4,431       -       5,482   Substandard - accruing     -       236       -       -       -       11,380       -       -       11,616   Substandard -Non-accrual     -       -       -       -       130       376       -       -       506   Total Other mortgage   $ 23,499     $ 881,893     $ 444,982     $ 397,700     $ 260,163     $ 427,363     $ 1,238,513     $ 12,321     $ 3,686,434                                                                             Consumer                                                                         Pass   $ 23,293     $ 12,787     $ 1,242     $ 4,428     $ 2,206     $ 6,463     $ 22,607     $ -     $ 73,026   Special Mention     -       -       -       -       -       -       9       -       9   Substandard - accruing     -       -       -       -       -       -       -       -       -   Total Consumer   $ 23,293     $ 12,787     $ 1,242     $ 4,428     $ 2,206     $ 6,463     $ 22,616     $ -     $ 73,035   Current-period gross charge-offs     -       -       -       -       -       -       501       -       501                                                                             Total Loans                                                                         Pass   $ 359,251     $ 2,748,592     $ 1,374,595     $ 1,016,157     $ 753,712     $ 1,469,625     $ 3,682,308     $ 19,958     $ 11,424,198   Special Mention     6,595       7,915       7,025       15,235       10,885       19,071       31,364       -       98,090   Substandard - accruing     -       236       -       374       10,856       40,947       13,296       -       65,709   Substandard -Non-accrual     -       452       568       733       5,716       4,360       5,069       -       16,897   Total Loans   $ 365,846     $ 2,757,195     $ 1,382,188     $ 1,032,499     $ 781,169     $ 1,534,003     $ 3,732,037     $ 19,958     $ 11,604,894   Current-period gross charge-offs   $ -     $ 4,717     $ -     $ -     $ 117     $ 446     $ 993     $ -     $ 6,273     15     The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of December 31, 2022:                                                       Revolving               2022     2021     2020     2019     2018     Prior     Loans     Total       (In Thousands)   Commercial, financial and agricultural                                                           Pass   $ 691,817     $ 502,648     $ 223,096     $ 144,587     $ 78,477     $ 134,893     $ 1,267,333     $ 3,042,851   Special Mention     6,906       3,737       1,101       1,748       570       898       29,516       44,476   Substandard     200       -       379       9,501       16,329       16,595       14,986       57,990   Total Commercial, financial and agricultural   $ 698,923     $ 506,385     $ 224,576     $ 155,836     $ 95,376     $ 152,386     $ 1,311,835     $ 3,145,317                                                                     Real estate - construction                                                                 Pass   $ 618,578     $ 638,126     $ 156,834     $ 15,197     $ 12,063     $ 14,847     $ 72,172     $ 1,527,817   Special Mention     2,500       -       -       -       -       873       -       3,373   Substandard     -       -       -       -       1,198       -       -       1,198   Total Real estate - construction   $ 621,078     $ 638,126     $ 156,834     $ 15,197     $ 13,261     $ 15,720     $ 72,172     $ 1,532,388                                                                     Owner-occupied commercial                                                                 Pass   $ 424,321     $ 496,298     $ 352,375     $ 199,987     $ 157,204     $ 477,926     $ 64,152     $ 2,172,263   Special Mention     2,362       -       -       2,723       4,682       6,917       1,687       18,371   Substandard     -       -       -       73       -       8,573       -       8,646   Total Owner-occupied commercial   $ 426,683     $ 496,298     $ 352,375     $ 202,783     $ 161,886     $ 493,416     $ 65,839     $ 2,199,280                                                                     1-4 family mortgage                                                                 Pass   $ 388,778     $ 273,515     $ 93,272     $ 52,209     $ 28,999     $ 57,512     $ 243,302     $ 1,137,587   Special Mention     315       445       816       375       294       881       2,854       5,980   Substandard     -       279       404       648       346       1,224       363       3,264   Total 1-4 family mortgage   $ 389,093     $ 274,239     $ 94,492     $ 53,232     $ 29,639     $ 59,617     $ 246,519     $ 1,146,831                                                                     Other mortgage                                                                 Pass   $ 1,027,747     $ 976,208     $ 517,392     $ 380,104     $ 130,228     $ 470,699     $ 75,669     $ 3,578,047   Special Mention     231       -       -       -       -       7,161       -       7,392   Substandard     -       -       -       130       4,569       7,612       -       12,311   Total Other mortgage   $ 1,027,978     $ 976,208     $ 517,392     $ 380,234     $ 134,797     $ 485,472     $ 75,669     $ 3,597,750                                                                     Consumer                                                                 Pass   $ 21,132     $ 5,845     $ 4,203     $ 1,759     $ 440     $ 2,988     $ 30,021     $ 66,388   Special Mention     -       -       -       -       -       14       -       14   Substandard     -       -       -       -       -       -       -       -   Total Consumer   $ 21,132     $ 5,845     $ 4,203     $ 1,759     $ 440     $ 3,002     $ 30,021     $ 66,402                                                                     Total Loans                                                                 Pass   $ 3,172,373     $ 2,892,640     $ 1,347,172     $ 793,843     $ 407,411     $ 1,158,865     $ 1,752,649     $ 11,524,953   Special Mention     12,314       4,182       1,917       4,846       5,546       16,744       34,057       79,606   Substandard     200       279       783       10,352       22,442       34,004       15,349       83,409   Total Loans   $ 3,184,887     $ 2,897,101     $ 1,349,872     $ 809,041     $ 435,399     $ 1,209,613     $ 1,802,055     $ 11,687,968     Loans by performance status as of June 30, 2023 and December 31, 2022 were as follows:   June 30, 2023   Performing     Nonperforming     Total                                 (In Thousands)   Commercial, financial and agricultural   $ 2,978,515     $ 7,938     $ 2,986,453   Real estate - construction     1,397,732       -       1,397,732   Real estate - mortgage:                         Owner-occupied commercial     2,288,496       5,506       2,294,002   1-4 family mortgage     1,162,842       4,396       1,167,238   Other mortgage     3,681,497       4,937       3,686,434   Total real estate mortgage     7,132,835       14,839       7,147,674   Consumer     72,968       67       73,035   Total   $ 11,582,050     $ 22,844     $ 11,604,894     16     December 31, 2022   Performing     Nonperforming     Total                                 (In Thousands)   Commercial, financial and agricultural   $ 3,138,014     $ 7,303     $ 3,145,317   Real estate - construction     1,532,388       -       1,532,388   Real estate - mortgage:                         Owner-occupied commercial     2,195,968       3,312       2,199,280   1-4 family mortgage     1,144,713       2,118       1,146,831   Other mortgage     3,592,732       5,018       3,597,750   Total real estate mortgage     6,933,413       10,448       6,943,861   Consumer     66,312       90       66,402   Total   $ 11,670,127     $ 17,841     $ 11,687,968     Loans by past due status as of June 30, 2023 and December 31, 2022 were as follows:   June 30, 2023   Past Due Status (Accruing Loans)                                                               Total Past     Total                     Nonaccrual       30-59 Days     60-89 Days     90+ Days     Due     Nonaccrual     Current     Total Loans     With no ACL                                                                         (In Thousands)   Commercial, financial and agricultural   $ 3,280     $ 596     $ 142     $ 4,018     $ 7,796     $ 2,974,639     $ 2,986,453     $ 3,815   Real estate - construction     -       19       -       19       -       1,397,713       1,397,732       -   Real estate - mortgage:                                                                 Owner-occupied commercial     2,279       670       -       2,949       5,506       2,285,547       2,294,002       5,505   1-4 family mortgage     1,356       3,274       1,307       5,937       3,089       1,158,212       1,167,238       109   Other mortgage     -       -       4,431       4,431       506       3,681,497       3,686,434       506   Total real estate - mortgage     3,635       3,944       5,738       13,317       9,101       7,125,256       7,147,674       6,120   Consumer     49       29       67       145       -       72,890       73,035       -   Total   $ 6,964     $ 4,588     $ 5,947     $ 17,499     $ 16,897     $ 11,570,498     $ 11,604,894     $ 9,935     December 31, 2022   Past Due Status (Accruing Loans)                                                               Total Past     Total                     Nonaccrual       30-59 Days     60-89 Days     90+ Days     Due     Nonaccrual     Current     Total Loans     With no ACL                                                                         (In Thousands)   Commercial, financial and agricultural   $ 1,075     $ 409     $ 195     $ 1,679     $ 7,108     $ 3,136,530     $ 3,145,317     $ 3,238   Real estate - construction     -       711       -       711       -       1,531,677       1,532,388       -   Real estate - mortgage:                                                                 Owner-occupied commercial     83       452       -       535       3,312       2,195,433       2,199,280       57   1-4 family mortgage     405       580       594       1,579       1,524       1,143,728       1,146,831       491   Other mortgage     231       -       4,512       4,743       506       3,592,501       3,597,750       -   Total real estate - mortgage     719       1,032       5,106       6,857       5,342       6,931,662       6,943,861       548   Consumer     174       128       90       392       -       66,010       66,402       621   Total   $ 1,968     $ 2,280     $ 5,391     $ 9,639     $ 12,450     $ 11,665,879     $ 11,687,968     $ 4,407     17     Under the current expected credit losses (“CECL”) methodology, the allowance for credit losses ("ACL") is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.            The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial and industrial ("C&I") revolving lines of credit and credit cards. Commercial and industrial ("C&I") revolving lines of credit and credit cards are members of the Commercial, financial and agricultural and Consumer portfolios, respectively. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools.  Consistent forecasts of the loss drivers are used across the loan segments.  At June 30, 2023 and December 31, 2022, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six -month straight-line reversion to long term averages.  The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts.  The Company expects national unemployment to be generally unchanged and national GDP growth rate to improve compared to the December 31, 2022 forecast.   The Company uses a loss-rate method to estimate expected credit losses for its C&I revolving lines of credit and credit card pools.  The C&I revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach.  This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD.  These two inputs are then applied to the outstanding pool balance.  The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool.  A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool.  Management has applied the loss-rate method to C&I lines of credit and to credit cards due to their generally short-term nature.  An expected loss ratio is applied based on internal and peer historical losses.   Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation.  The Company considers factors that are relevant within the qualitative framework which include the following:  lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.   Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:   Commercial, financial and agricultural loans include risks associated with the  borrower’s cash flow, debt service coverage, and management’s expertise.  These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with the  degree of specialization, mobility, and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.   Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project.  Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income.  During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.     Real estate mortgage loans consist of loans secured by commercial and residential real estate.  Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property.  Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.  Also, commercial real estate loans typically involve relatively large loan balances to a single borrower.  Residential real estate lending risks are generally less significant than those of other loans.  Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.   Consumer loans carry a moderate degree of risk compared to other loans.  They are generally more risky than traditional residential real estate loans but less risky than commercial loans.  Risk of default is usually determined by the well-being of the local economies.  During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.   18     The following table presents changes in the ACL, segregated by loan type, for the three and six months ended June 30, 2023 and June 30, 2022.       Commercial,                                       financial and     Real estate -     Real estate -                       agricultural     construction     mortgage     Consumer     Total                                                 (In Thousands)       Three Months Ended June 30, 2023   Allowance for credit losses:                                         Balance at April 1, 2023   $ 42,895     $ 40,483     $ 63,157     $ 2,430     $ 148,965   Charge-offs     ( 4,336 )     -       ( 131 )     ( 133 )     ( 4,600 ) Recoveries     1,232       -       -       21       1,253   Provision     3,674       ( 40 )     3,211       ( 191 )     6,654   Balance at June 30, 2023   $ 43,465     $ 40,443     $ 66,237     $ 2,127     $ 152,272                                                 Three Months Ended June 30, 2022   Allowance for credit losses:                                         Balance at April 1, 2022   $ 41,417     $ 27,821     $ 48,548     $ 1,677     $ 119,463   Charge-offs     ( 1,666 )     -       ( 23 )     ( 124 )     ( 1,813 ) Recoveries     1,217       -       -       13       1,230   Provision     642       8,172       268       426       9,507   Balance at June 30, 2022   $ 41,610     $ 35,993     $ 48,793     $ 1,992     $ 128,387                                                 Six Months Ended June 30, 2023   Allowance for credit losses:                                         Balance at January 1, 2023   $ 42,830     $ 42,889     $ 58,652     $ 1,926     $ 146,297   Charge-offs     ( 5,593 )     -       ( 157 )     ( 501 )     ( 6,273 ) Recoveries     1,360       3       1       32       1,396   Provision     4,868       ( 2,449 )     7,740       692       10,851   Balance at June 30, 2023   $ 43,465     $ 40,443     $ 66,237     $ 2,127     $ 152,272                                                 Six Months Ended June 30, 2022   Allowance for credit losses:                                         Balance at January 1, 2022   $ 41,869     $ 26,994     $ 45,829     $ 1,968     $ 116,660   Charge-offs     ( 4,240 )     -       ( 51 )     ( 199 )     ( 4,489 ) Recoveries     1,322       -       -       25       1,347   Provision     2,659       8,999       3,014       198       14,869   Balance at June 30, 2022   $ 41,610     $ 35,993     $ 48,793     $ 1,992     $ 128,387     We maintain an ACL on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The ACL on unfunded commitments was $ 575,000 at June 30, 2023 and $ 575,000 at December 31, 2022. There was no provision expense the three and six months ended June 30, 2023, respectively, and provision expense was $ 0 and $ 300,000 for the three and six months ended June 30, 2022, respectively.   Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:   19                 Accounts                             ACL   June 30, 2023   Real Estate     Receivable     Equipment     Other     Total     Allocation       (In Thousands)   Commercial, financial and agricultural   $ 20,596     $ 7,944     $ 830     $ 23,962     $ 53,332     $ 11,166   Real estate - construction     -       -       -       1,011       1,011       2   Real estate - mortgage:                                                 Owner-occupied commercial     12,034       -       -       48       12,082       226   1-4 family mortgage     11,259       -       -       -       11,259       78   Other mortgage     4,850       -       -       -       4,850       385   Total real estate - mortgage     28,143       -       -       48       28,191       689   Consumer     -       -       -       -       -       -   Total   $ 48,739     $ 7,944     $ 830     $ 25,021     $ 82,534     $ 11,857                 Accounts                             ACL   December 31, 2022   Real Estate     Receivable     Equipment     Other     Total     Allocation       (In Thousands)   Commercial, financial and agricultural   $ 20,061     $ 12,092     $ 837     $ 24,998     $ 57,988     $ 9,910   Real estate - construction     -       -       -       1,198       1,198       7   Real estate - mortgage:                                                 Owner-occupied commercial     8,573       -       -       74       8,647       154   1-4 family mortgage     3,260       -       -       -       3,260       316   Other mortgage     12,311       -       -       -       12,311       -   Total real estate - mortgage     24,144       -       -       74       24,218       470   Consumer     -       -       -       -       -       -   Total   $ 44,205     $ 12,092     $ 837     $ 26,270     $ 83,404     $ 10,387     On March 22, 2020, an Interagency Statement was issued by banking regulators that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID- 19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID- 19 outbreak declared by the President of the United States under the National Emergencies Act terminates. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID- 19 emergency terminates. In accordance with such guidance, the Bank offered short-term modifications made in response to COVID- 19 to borrowers who are current and otherwise not past due. These include short-term ( 180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.   The Bank adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update (“ASU”) 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023. The amendments in ASU 2022 - 02 eliminated the recognition and measure of TDRs and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.   The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2023:       Three months ended June 30, 2023               Payment Deferral                       Term     and Term             Percentage of       Extensions     Extensions     Total     Total Loans       (In Thousands)                                     Commercial, financial and agricultural   $ 2,951     $ -     $ 2,951       0.03 % Owner-occupied commercial     2,511       -       2,511       0.02 % Total   $ 5,462     $ -     $ 5,462       0.05 %   20         Six months ended June 30, 2023               Payment Deferral                       Term     and Term             Percentage of       Extensions     Extensions     Total     Total Loans       (In Thousands)                                     Commercial, financial and agricultural   $ 42,052     $ -     $ 42,052       0.36 % Real estate - construction     200       -       200       - % Owner-occupied commercial     11,703       701       12,404       0.11 % 1-4 family mortgage     214       -       214       - % Other mortgage     11,254       359       11,613       0.10 % Total   $ 65,423     $ 1,060     $ 66,483       0.57 %   The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023:       Three months ended June 30, 2023               Total Payment       Term Extensions     Deferral       (In months)     (In Thousands)   Commercial, financial and agricultural     9 to 65     $ -   Real estate - construction     -       -   Owner-occupied commercial     9 to 60       -   1-4 family mortgage     -       -   Other mortgage     -       -         Six months ended June 30, 2023               Total Payment       Term Extensions     Deferral       (In months)     (In Thousands)   Commercial, financial and agricultural     3 to 65     $ -   Real estate - construction     6       -   Owner-occupied commercial     3 to 60       49   1-4 family mortgage     3       -   Other mortgage     3 to 36       59     No loans modified on or after January 1, 2023, the date the Company adopted ASU 2022 - 02, were past due greater than 30 days or on non-accrual as of June 30, 2023.   As of June 30, 2023, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the three and six months of June 30, 2023 that subsequently defaulted. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.   TDRs at December 31, 2022 and June 30, 2022 totaled $ 2.5 million and $ 2.1 million, respectively.  The portion of those TDRs accruing interest at December 31, 2022 and June 30, 2022 totaled $ 431,000 and $ 421,000 , respectively.  There were no modifications made to new TDRs or renewals of existing TDRs for the three and six months ended June 30, 2022.There were  no  loans which were modified in the previous  twelve  months (i.e., the  twelve  months prior to default) that defaulted during the  three  and  six  months ended  June 30, 2022. For purposes of this disclosure, default is defined as  90  days past due and still accruing or placement on nonaccrual status.     NOTE 6 - LEASES   The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 10 years. At June 30, 2023, the Company had lease right-of-use assets and lease liabilities totaling $ 19.4 million and $ 20.3 million, respectively, compared to $ 18.8 million and $ 19.6 million, respectively, at December 31, 2022 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheets.   21     Maturities of operating lease liabilities as of June 30, 2023 are as follows:       June 30, 2023       (In Thousands)   2023 (remaining)   $ 2,331   2024     3,916   2025     3,832   2026     3,284   2027     2,694   thereafter     6,096   Total lease payments     22,153   Less: imputed interest     ( 1,871 ) Present value of operating lease liabilities   $ 20,282     As of June 30, 2023, the weighted average remaining term of operating leases is 6.2 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.02 %.   Operating cash outflows related to leases were $ 1.3 million and $ 2.5 million for the three and six months ended June 30, 2023, respectively, compared to $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively.   Lease costs during the three and six months ended June 30, 2023 and June 30, 2022 were as follows (in thousands):       Three Months Ended June 30,       2023     2022   Operating lease cost   $ 1,269     $ 1,051   Short-term lease cost     -       17   Variable lease cost     192       151   Sublease income     ( 8 )     ( 5 ) Net lease cost   $ 1,453     $ 1,214         Six Months Ended June 30,       2023     2022   Operating lease cost   $ 2,499     $ 2,095   Short-term lease cost     -       25   Variable lease cost     383       300   Sublease income     ( 16 )     ( 29 ) Net lease cost   $ 2,866     $ 2,391       NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS   Stock Incentive Plan   The Company has a stock incentive plan as described below. The compensation cost that has been charged to earnings for the plan was approximately $ 982,000 and $ 1.8 million for the three and six months ended June 30, 2023, respectively, and $ 797,000 and $ 1.6 million for the three and six months ended June 30, 2022, respectively.   The Company’s 2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. The plan allows for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plan is ten years.   The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model which incorporates the assumptions noted in the following table. Expected volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is based on the simplified method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of grant.   22     There were no grants of stock options during the three and six months ended June 30, 2023 and 2022.   The following table summarizes stock option activity during the six months ended June 30, 2023 and 2022:                       Weighted                       Weighted     Average                       Average     Remaining     Aggregate               Exercise     Contractual     Intrinsic       Shares     Price     Term (years)     Value                               (In Thousands)   Six Months Ended June 30, 2023:                                 Outstanding at January 1, 2023     280,000     $ 19.43       3.0     $ 14,088   Exercised     ( 87,700 )     12.04       1.0       2,533   Forfeited     ( 1,000 )     34.09       5.6       7   Outstanding at June 30, 2023     191,300       22.65       3.4     $ 6,235                                     Exercisable at June 30, 2023     137,800     $ 16.83       1.9     $ 3,432                                     Six Months Ended June 30, 2022:                                 Outstanding at January 1, 2022     353,250     $ 19.28       3.8     $ 23,525   Exercised     ( 48,000 )     17.85       2.8       2,931   Outstanding at June 30, 2022     305,250     $ 19.51       3.4     $ 18,431                                     Exercisable at June 30, 2022     243,500     $ 14.77       2.5     $ 15,924     As of June 30, 2023, there was $ 117,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next eight months.   Restricted Stock and Performance Shares   The Company periodically grants restricted stock awards that vest upon time-based service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of June 30, 2023, there was $ 5.4 million of total unrecognized compensation cost related to non-vested time-based restricted stock. The cost is expected to be recognized evenly over the remaining 2.2 years of the restricted stock’s vesting period.   The Company periodically grants performance shares that give plan participants the opportunity to earn between 0 % and 150 % of the number of performance shares granted based on achieving certain market conditions. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years starting on the grant date. The fair value of the performance shares is determined using a Monte Carlo simulation model on the grant date. As of June 30, 2023, there was $ 1.1 million of total unrecognized compensation cost related to non-vested performance shares. As of June 30, 2023, non-vested performance shares had a weighted average remaining time to vest of 1.6 years.       Restricted Stock     Performance Shares       Shares     Weighted Average Grant Date Fair Value     Shares     Weighted Average Grant Date Fair Value   Six Months Ended June 30, 2023:                                 Non-vested at January 1, 2023     141,580     $ 56.39       23,852     $ 54.16   Granted     47,309       60.40       8,091       70.29   Vested     ( 29,852 )     52.27       -       -   Forfeited     ( 10,041 )     63.90       -       -   Non-vested at June 30, 2023     148,996     $ 57.98       31,943     $ 58.25                                     Six Months Ended June 30, 2022:                                 Non-vested at January 1, 2022     127,602     $ 42.27       12,437     $ 37.05   Granted     46,266       83.06       9,165       69.68   Vested     ( 23,507 )     44.85       -       -   Forfeited     ( 3,498 )     53.25       -       -   Non-vested at June 30, 2022     146,863     $ 54.45       21,602     $ 50.89     23       NOTE 8 - DERIVATIVES   The Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in May of 2020 to limit exposures to increases in interest rates. The interest rate cap was not designated as a hedging instrument. The interest rate cap had an original term of 3 years, a notional amount of $ 300 million and was tied to the one -month LIBOR rate with a strike rate of 0.50 %. The fair value of the interest rate cap was carried on the Consolidated Balance Sheet in other assets and the change in fair value was recognized in noninterest income each quarter. The interest rate cap contract expired May 4, 2023.   The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” basis, which do not meet the definition of a derivative instrument. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30 -day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments with customers related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of June 30, 2023 and December 31, 2022 were not material.     NOTE 9 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS   In March 2022, the FASB issued ASU 2022 - 02 . The amendments eliminate the accounting guidance for TDR recognition in Subtopic 310 - 40, Receivables – Trouble Debt Restructurings by Creditors by entities that have adopted ASU 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments. For public business entities, the amendments require disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326 - 20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326 - 20 - 50 - 6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The Company adopted ASU 2022 - 02 effective January 1, 2023 on a prospective basis. Adoption of ASU 2022 - 02 did not have a material impact on the Company’s consolidated financial statements.     NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS   In March 2023, the FASB issued ASU 2023 - 02, Investments-Equity Method and Joint Ventures (Topic 323 ): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. These amendments allow entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits. ASU 2023 - 02 is effective for public entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period. The Company is assessing its tax credit investments for whether they qualify for proportional amortization treatment and plans to adopt the amendments soon after. The Company does not currently believe the amendments will have a material impact on its consolidated financial statements.     NOTE 11 - FAIR VALUE MEASUREMENT   Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below:   Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.   24     In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.   Debt Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing service regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available, as in the case of certain corporate securities, these securities are classified in Level 3 of the hierarchy.   Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy.   Loans Individually Evaluated. Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Loans individually evaluated are carried at the present value of expected future cash flows using a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in ASC 820 - 10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individual evaluation. A portion of the allowance for credit losses is allocated to loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of June 30, 2023 was 0 % to 85 % and 20.2 %, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0 % to 82 % and 19.5 % respectively. Loans individually evaluated are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $ 4.1 million and $ 6.3 million during the three and six months ended June 30, 2023, respectively, and $ 1.2 million and $ 1.8 million during the three and six months ended June 30, 2022, respectively.   Other Real Estate Owned .  Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs.  Any write-downs to fair value at the time of transfer to OREO are charged to the allowance for credit losses subsequent to foreclosure.  Values are derived from appraisals of underlying collateral and discounted cash flow analysis.  Appraisals are performed by certified and licensed appraisers.  Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis.  In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals.  The range of fair value adjustments and weighted average adjustment as of June 30, 2023 was 24 % to 100 % and 30 %, respectively.  The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0 % to 100 % and 53.3 %, respectively.  These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO and repossessed assets of $ 5,000 was recognized for both the three and six months ended June 30, 2023, respectively, and $ 125,000 and $ 119,000 for the three and six months ended June 30, 2022, respectively. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy.   25     There were two residential real estate loans with an aggregate balance of $ 237,000 foreclosed and classified as OREO as of June 30, 2023, compared to two residential real estate loan foreclosures for $ 248,000 as of December 31, 2022.   Two residential real estate loans for $ 181,000 were in the process of being foreclosed as of June 30, 2023. There were no residential real estate loans that were in the process of being foreclosed as of December 31, 2022.   The following table presents the Company’s financial assets carried at fair value on a recurring basis as of June 30, 2023 and December 31, 2022. There were no liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022.       Fair Value Measurements at June 30, 2023 Using               Quoted Prices in                               Active Markets     Significant Other     Significant               for Identical     Observable Inputs     Unobservable               Assets (Level 1)     (Level 2)     Inputs (Level 3)     Total   Assets Measured on a Recurring Basis:   (In Thousands)   Available for sale debt securities:                                 U.S. Treasury securities   $ 414,454     $ -     $ -     $ 414,454   Government agency securities     -       4       -       4   Mortgage-backed securities     -       229,942       -       229,942   State and municipal securities     -       11,963       -       11,963   Corporate debt     -       327,698       6,860       334,558   Total available-for-sale debt securities     414,454       569,607       6,860       990,921   Total assets at fair value   $ 414,454     $ 569,607     $ 6,860     $ 990,921         Fair Value Measurements at December 31, 2022 Using               Quoted Prices in                               Active Markets     Significant Other     Significant               for Identical     Observable Inputs     Unobservable               Assets (Level 1)     (Level 2)     Inputs (Level 3)     Total   Assets Measured on a Recurring Basis:   (In Thousands)   Available for sale debt securities:                                 U.S. Treasury securities   $ 2,969     $ -     $ -     $ 2,969   Government agency securities     -       9       -       9   Mortgage-backed securities     -       249,703       -       249,703   State and municipal securities     -       13,609       -       13,609   Corporate debt     -       367,665       10,860       378,525   Total available-for-sale debt securities     2,969       630,986       10,860       644,815   Interest rate cap derivative     -       4,201       -       4,201   Total assets at fair value   $ 2,969     $ 635,187     $ 10,860     $ 649,016     The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022:       Fair Value Measurements at June 30, 2023               Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Total   Assets Measured on a Nonrecurring Basis:   (In Thousands)   Loans individually evaluated   $ -     $ -     $ 70,677     $ 70,677   Other real estate owned and repossessed assets     -       -       832       832   Total assets at fair value   $ -     $ -     $ 71,509     $ 71,509     26         Fair Value Measurements at December 31, 2022               Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Total   Assets Measured on a Nonrecurring Basis:   (In Thousands)   Loans individually evaluated   $ -     $ -     $ 73,017     $ 73,017   Other real estate owned and repossessed assets     -       -       248       248   Total assets at fair value   $ -     $ -     $ 73,265     $ 73,265     There were no liabilities measured at fair value on a non-recurring basis as of June 30, 2023, and December 31, 2022.   In the case of the investment securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected.  The nature of the remaining assets and liabilities is such that transfers in and out of any level are expected to be rare.  For the six months ended June 30, 2023, there was one transfer from Level 3 to Level 2.   The table below includes a rollforward of the balance sheet amounts for the three and six months ended June 30, 2023 and June 30, 2022 ( including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:       For the three months ended June 30,     For the six months ended June 30,       2023     2022     2023     2022       Available-for- sale Securities     Available-for- sale Securities     Available-for- sale Securities     Available-for- sale Securities       (In Thousands)   Fair value, beginning of period   $ 6,860     $ 11,500     $ 10,860     $ 16,992   Transfers into Level 3     -       -       -       -   Total realized gains included in income     -       -       -       -   Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end     -       ( 462 )     160       ( 805 ) Purchases     -       -       -       -   Transfers out of Level 3     -       ( 5,038 )     ( 4,160 )     ( 10,187 ) Fair value, end of period   $ 6,860     $ 6,000     $ 6,860     $ 6,000     The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.   The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of June 30, 2023 and December 31, 2022 were as follows:       June 30, 2023     December 31, 2022       Carrying             Carrying               Amount     Fair Value     Amount     Fair Value       (In Thousands)   Financial Assets:                                 Level 1 Inputs:                                 Cash and cash equivalents   $ 959,734     $ 959,734     $ 814,538     $ 814,538   Held to maturity U.S. Treasury securities     557,084       522,826       507,601       470,954                                     Level 2 Inputs:                                 Federal funds sold     17,958       17,958       1,515       1,515   Held to maturity debt securities     499,972       440,767       526,720       464,749   Mortgage loans held for sale     3,981       3,943       1,607       1,604   Restricted equity securities     7,307       7,307       7,734       7,734                                     Level 3 Inputs:                                 Held to maturity debt securities     250       250       250       250   Loans, net     11,452,622       11,021,748       11,541,671       11,265,517                                     Financial Liabilities:                                 Level 2 Inputs:                                 Deposits   $ 12,288,219     $ 12,272,714     $ 11,546,805     $ 11,529,647   Federal funds purchased     1,298,066       1,298,066       1,618,798       1,618,798   Other borrowings     64,737       57,583       64,726       57,101     27     ITEM 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary, ServisFirst Bank. This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated financial statements as of and for the three and six months ended June 30, 2023 and June 30, 2022.   Forward-Looking Statements   Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including, but not limited to: general economic conditions, especially in the credit markets and in the Southeast; the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes as a result of our reclassification as a large financial institution by the FDIC; changes in our loan portfolio and the deposit base; credit issues associated with the efficacy of return to office policies; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and non-bank financial institutions. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q for fiscal year 2023 and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained herein. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.   Business   We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. We also operate loan production offices in Florida, North Carolina, and Virginia. Through the bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.   28     Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.   Second quarter highlights     ● Diluted earnings per common share of $0.98 for the second quarter of 2023, a decrease of 14%, from the second quarter 2022.   ● Average loans of $11.6 billion for the second quarter of 2023, an increase of $1.4 billion, or 14%, from a year ago.   ● Average deposits of $11.6 billion for the second quarter of 2023, a decrease of $459.4 million, or 4%, from a year ago.   ● Net interest income of $101.3 million for the second quarter of 2023, a decrease $15.1 million, or 13%, from the second quarter of 2022.   ● Net interest margin of 2.93% for the second quarter of 2023 decreased 33 bps from 3.26% in the second quarter of 2022. The decrease primarily resulted from increases in rates paid on interest-bearing deposits.   Overview   As of June 30, 2023, we had consolidated total assets of $15.1 billion, an increase of $477.1 million, or 3.3%, from total assets of $14.6 billion at December 31, 2022.  Total loans were $11.6 billion at June 30, 2023, a decrease of $83.1 million, or 0.7%, from $11.7 billion at December 31, 2022. Total deposits were $12.3 billion at June 30, 2023, an increase of $741.4 million, or 6.4%, from $11.5 billion at December 31, 2022.   Net income available to common stockholders for the three months ended June 30, 2023 was $53.4 million down $8.7 million, or 14.0%, from $62.1 million for the three months ended June 30, 2022.  Basic and diluted earnings per common share  were both $0.98 for the three months ended June 30, 2023, compared to $1.14 for both in the corresponding period in 2022.    Net income available to common stockholders for the six months ended June 30, 2023 was $111.4 million, a decrease of $8.3 million, or 6.9%, from $119.7 million for the corresponding period in 2022.  Basic and diluted earnings per common share were $2.05 and $2.04, respectively, for the six months ended June 30, 2023, compared to $2.21 and $2.20, respectively, for the corresponding period in 2022.   Performance Ratios   The following table presents selected ratios of our results of operations for the three and six months ended June 30, 2023, and 2022.       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Return on average assets     1.50 %     1.67 %     1.57 %     1.60 % Return on average common stockholders' equity     15.85 %     20.93 %     16.83 %     20.52 % Dividend payout ratio     28.56 %     20.19 %     28.56 %     20.95 % Net interest margin (1)     2.93 %     3.26 %     3.04 %     3.07 % Efficiency ratio (2)     35.02 %     31.64 %     34.81 %     32.16 % Average stockholders' equity to average total assets     9.46 %     7.99 %     9.31 %     7.79 %   (1) Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets. (2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.   29     Financial Condition   Cash and Cash Equivalents   At June 30, 2023, we had $18.0 million in federal funds sold, compared to $1.5 million at December 31, 2022. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At June 30, 2023, we had $840.4 million in balances at the Federal Reserve, compared to $693.8 million at December 31, 2022.   Investment Securities   Debt securities available for sale totaled $990.9 million at June 30, 2023 and  $644.8 million at December 31, 2022. Investment securities held to maturity totaled $1.06 billion at June 30, 2023 and $1.0 billion at December 31, 2022. We had paydowns of $46.3 million on mortgage-backed securities and government agencies, maturities of $12.8 million on municipal bonds, corporate securities and treasury securities, and calls of $13.0 million on U.S. government agencies and municipal securities during the six months ended June 30, 2023. We recognized a $2.8 million loss on the sale of available for sale debt securities during the second quarter of 2022. We sold seven debt securities available for sale for $33.4 million that were yielding less than 1.00%. We purchased $462.8 million in US Treasuries during the six months ended June 30, 2023, compared to $360.5 million in US Treasuries, $286.7 million in mortgage-backed securities, and $76.4 million in corporate securities during the six months ended June 30, 2022.  For a tabular presentation of debt securities available for sale and held to maturity at June 30, 2023 and December 31, 2022, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.   The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.   All investment securities in an unrealized loss position as of June 30, 2023 continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is not likely that we will be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.   The Company does not invest in collateralized debt obligations (“CDOs”). As of June 30, 2023, we had $385.7 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of June 30, 2023.   The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.3 billion and $789.3 million as of June 30, 2023 and December 31, 2022, respectively.   Loans   We had total loans of $11.6 billion at June 30, 2023, a decrease of $83.1 million, or 0.7%, compared to $11.7 billion at December 31, 2022.   Asset Quality   The Company assesses the adequacy of its allowance for credit losses ("ACL") at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.   30     Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” and “Note 5 – Loans” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.   The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.   Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as TDRs. Specific allocations of the ACL for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.       As of and for the Three Months Ended     As of and for the Six Months Ended       June 30,     June 30,       2023     2022     2023     2022       (Dollars in thousands)   Total loans outstanding, net of unearned income   $ 11,604,894     $ 10,617,320     $ 11,604,894     $ 10,617,320   Average loans outstanding, net of unearned income   $ 11,599,320     $ 10,189,086     $ 11,625,224     $ 9,919,381   Allowance for credit losses at beginning of period     148,965       119,463       146,297       116,660   Charge-offs:                                 Commercial, financial and agricultural loans     4,336       1,667       5,593       4,241   Real estate - construction     -       -       -       -   Real estate - mortgage     131       23       157       50   Consumer loans     133       123       501       198   Total charge-offs     4,600       1,813       6,273       4,489   Recoveries:                                 Commercial, financial and agricultural loans     1,233       1,217       1,361       1,322   Real estate - construction     -       -       3       -   Real estate - mortgage     -       -       1       -   Consumer loans     21       13       32       25   Total recoveries     1,254       1,230       1,397       1,347   Net charge-offs     3,346       583       4,876       3,142   Provision for credit losses     6,654       9,507       10,851       14,869   Allowance for credit losses at period end   $ 152,272     $ 128,387     $ 152,272     $ 128,387   Allowance for credit losses to period end loans     1.31 %     1.21 %     1.31 %     1.21 % Net charge-offs to average loans     0.11 %     0.02 %     0.06 %     0.04 %   31                 Percentage of loans               in each category   June 30, 2023   Amount     to total loans       (In Thousands)   Commercial, financial and agricultural   $ 43,465       33.22 % Real estate - construction     40,443       10.08 % Real estate - mortgage     66,237       55.97 % Consumer     2,127       0.73 % Total   $ 152,272       100.00 %                               Percentage of loans               in each category   December 31, 2022   Amount     to total loans       (In Thousands)   Commercial, financial and agricultural   $ 42,830       31.30 % Real estate - construction     42,889       11.57 % Real estate - mortgage     58,652       56.43 % Consumer     1,926       0.70 % Total   $ 146,297       100.00 %   Nonperforming Assets   Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased to $22.8 million at June 30, 2023, compared to $17.8 million at December 31, 2022. Of this total, nonaccrual loans of $16.9 million at June 30, 2023 represented a net increase of $4.4 million from nonaccrual loans at December 31, 2022.  Excluding credit card accounts, there were nine loans 90 or more days past due and still accruing totaling $4.4 million at June 30, 2023, compared to one loan totaling $4.6 million at December 31, 2022. Loans made to borrowers experiencing financial difficulty that were modified during the three months ended June 30, 2023 were $5.5 million. TDRs at December 31, 2022, and June 30, 2022 were $2.5 million and $2.4 million, respectively.   The following table details our nonperforming assets at June 30, 2023 and December 31, 2022:       June 30, 2023     December 31, 2022               Number of             Number of       Balance     Loans     Balance     Loans       (Dollar Amounts In Thousands)   Nonaccrual loans:                                 Commercial, financial and agricultural   $ 7,796       22     $ 7,108       18   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     5,506       3       3,312       3   1-4 family mortgage     3,089       24       1,524       16   Other mortgage     506       2       506       2   Total real estate - mortgage     9,101       29       5,342       21   Consumer     -       -       -       -   Total Nonaccrual loans:   $ 16,897       51     $ 12,450       39                                     90+ days past due and accruing:                                 Commercial, financial and agricultural   $ 142       13     $ 195       26   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     -       -       -       -   1-4 family mortgage     1,307       8       594       5   Other mortgage     4,431       1       4,512       1   Total real estate - mortgage     5,738       9       5,106       6   Consumer     67       21       90       44   Total 90+ days past due and accruing:   $ 5,947       43     $ 5,391       76                                     Total Nonperforming Loans:   $ 22,844       94     $ 17,841       115                                     Plus: Other real estate owned and repossessions     832       2       248       2   Total Nonperforming Assets   $ 23,676       96     $ 18,089       117                                     Restructured accruing loans:                                 Commercial, financial and agricultural   $ -       -     $ 2,480       5   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     -       -       -       -   1-4 family mortgage     -       -       -       -   Other mortgage     -       -       -       -   Total real estate - mortgage     -       -       -       -   Consumer     -       -       -       -   Total restructured accruing loans:   $ -       -     $ 2,480       5                                     Total Nonperforming assets and restructured accruing loans   $ 23,676       96     $ 20,569       122                                     Ratios:                                 Nonperforming loans to total loans     0.20 %             0.15 %         Nonperforming assets to total loans plus other real estate owned and repossessions     0.20 %             0.16 %         Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions     0.20 %             0.16 %           32     OREO and repossessed assets increased to $832,000 at June 30, 2023, compared to $248,000 at December 31, 2022. The following table summarizes OREO and repossessed asset activity for the six months ended June 30, 2023 and 2022:       Six Months Ended June 30,       2023     2022       (In thousands)   Balance at beginning of period   $ 248     $ 1,208   Transfers from loans and capitalized expenses     737       857   Proceeds from sales     (158 )     (1,091 ) Internally financed sales     -       -   Write-downs / net gain (loss) on sales     5       233   Balance at end of period   $ 832     $ 1,207     The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent if management believes that the collection of interest is not expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the allowance for credit losses to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.   In keeping with guidance from regulators, the Company continues to work with COVID-19 affected borrowers to defer their payments and interest. While interest continues to accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. As of June 30, 2023, the Company carries $2.3 million of accrued interest income on deferrals made to COVID-19 affected borrowers compared to $2.4 million at December 31, 2022. At this time, the Company is unable to project the materiality of such an impact on future deferrals to COVID-19 affected borrowers but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.   Deposits   We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Total deposits were $12.3 billion at June 30, 2023, an increase of $741.4 million, or 6.4%, from $11.5 billion at December 31, 2022. The bulk of the increase in our total deposits were in interest-bearing deposits, money market accounts and time deposits. We anticipate long-term sustainable growth in deposits through continued development of market share in our less mature markets and through organic growth in our mature markets.   For amounts and rates of our deposits by category, see the table “Average Balance Sheets and Net Interest Analysis on a Fully Taxable-Equivalent Basis” under the subheading “Net Interest Income.”   33     The following table summarizes balances of our deposits and the percentage of each type to the total at June 30, 2023 and December 31, 2022:       June 30, 2023     December 31, 2022   Noninterest-bearing demand   $ 2,855,102       23.23 %   $ 3,321,347       28.76 % Interest-bearing demand     2,368,585       19.28 %     1,861,496       16.12 % Money market     5,915,893       48.14 %     5,362,705       46.44 % Savings     115,826       0.94 %     138,450       1.20 % Time deposits , $250,000 and under     320,322       2.61 %     239,772       2.08 % Time deposits, over $250,000     712,491       5.80 %     573,035       4.96 % Brokered time deposits     -       - %     50,000       0.43 %     $ 12,288,219       100.00 %   $ 11,546,805       100.00 %   At June 30, 2023 and December 31, 2022, we estimate that we had approximately $7.8 billion and $7.5 billion, respectively, in uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit. Included in our uninsured deposits at June 30, 2023 and December 31, 2022, we estimate that we had approximately $1.9 billion and $938.7 million, respectively, in deposits which are collateralized.   The following table presents the maturities of our time deposits in excess of insurance limit as of June 30, 2023.       Portion of time deposits in excess of insurance limit       June 30, 2023   Time deposits otherwise uninsured with a maturity of:   (In Thousands)   3 months or less   $ 72,282   Over 3 through 6 months     43,990   Over 6 months through 12 months     146,259   Over 12 months     94,290   Total   $ 356,821     The uninsured deposit data for 2023 and 2022 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.   Other Borrowings   Our borrowings consist of federal funds purchased and subordinated notes payable. We had $1.30 billion and $1.62 billion at June 30, 2023 and December 31, 2022, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 5.13% for the quarter ended June 30, 2023.  Other borrowings consist of the following:     ● $34.75 million of the Company’s 4% Subordinated Notes due October 21, 2030, which were issued in a private placement in October 2020 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to October 21, 2025.   ● $30.0 million of 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually.   Liquidity   Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, and other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.   34     The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity were to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At June 30, 2023, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $1.7 billion. The Bank had loans pledged the FHLB which provided approximately $1.9 billion in available funding. The Bank’s policy limits on brokered deposits would allow for up to $3.6 billion in available funding for brokered deposits. At June 30, 2023, the Bank had borrowing availability of approximately $931.0 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements.  We believe these sources of funding are adequate to meet our anticipated funding needs.   Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, correspondent banking relationships and related federal funds purchased, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Other Borrowings”. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding in order to maintain our current growth rate into the future.   We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines.   The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $14.29 billion and $14.34 billion for the three and six months ended June 30, 2023.     For the Three Months Ended June 30,   For the Six Months Ended June 30,     2023     2022     2023     2022   Sources of Funds:                         Deposits:                         Non-interest-bearing   20.1 %   32.3 %   20.7 %   32.1 % Interest-bearing   60.7     48.4     59.5     48.8   Federal funds purchased   8.3     10.4     9.0     10.5   Long term debt and other borrowings   0.7     0.4     0.7     0.4   Other liabilities   0.5     0.4     0.5     0.4   Equity capital   9.8     8.1     9.6     7.8   Total sources   100.0 %   100.0 %   100.0 %   100.0 %                           Uses of Funds:                         Loans   81.2 %   68.4 %   81.1 %   65.8 % Securities   12.3     12.0     12.2     11.0   Interest-bearing balances with banks   3.2     15.7     3.4     19.8   Federal funds sold   0.1     0.2     0.2     0.2   Other assets   3.1     3.8     3.1     3.4   Total uses   100.0 %   100.1 %   100.0 %   100.0 %   Capital Adequacy   Total stockholders’ equity attributable to us at June 30, 2023 was $1.36 billion, or 9.04% of total assets. At December 31, 2022, total stockholders’ equity attributable to us was $1.30 billion, or 8.89% of total assets.   As of June 30, 2023, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum common equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of June 30, 2023.   The following table sets forth (i) the capital ratios required by the FDIC and the Alabama Banking Department’s leverage ratio requirement and (ii) our actual ratios, not including the applicable 2.5% capital conservation buffer, of capital to total regulatory or risk-weighted assets, as of June 30, 2023, December 31, 2022 and June 30, 2022:   35                                         To Be Well Capitalized                       For Capital Adequacy     Under Prompt Corrective       Actual     Purposes     Action Provisions       Amount     Ratio     Amount     Ratio     Amount     Ratio   As of June 30, 2023   (Dollars in Thousands)   CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,408,063       10.37 %   $ 610,829       4.50 %     N/A       N/A   ServisFirst Bank     1,467,567       10.81 %     610,852       4.50 %   $ 882,341       6.50 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,408,563       10.38 %     814,438       6.00 %     N/A       N/A   ServisFirst Bank     1,468,067       10.81 %     814,469       6.00 %     1,085,958       8.00 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,620,827       11.94 %     1,085,918       8.00 %     N/A       N/A   ServisFirst Bank     1,620,914       11.94 %     1,085,958       8.00 %     1,357,448       10.00   Tier 1 Capital to Average Assets:                                                 Consolidated     1,408,563       9.83 %     572,997       4.00 %     N/A       N/A   ServisFirst Bank     1,468,067       10.25 %     572,997       4.00 %     716,246       5.00 %                                                   As of December 31, 2022                                                 CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,326,035       9.55 %   $ 624,986       4.50 %     N/A       N/A   ServisFirst Bank     1,385,697       9.98 %     624,942       4.50 %   $ 902,694       7 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,326,535       9.55 %     833,315       6.00 %     N/A       N/A   ServisFirst Bank     1,386,197       9.98 %     833,256       6.00 %     1,111,008       8 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,532,134       11.03 %     1,111,086       8.00 %     N/A       N/A   ServisFirst Bank     1,533,069       11.04 %     1,111,008       8.00 %     1,388,760       10 % Tier 1 Capital to Average Assets:                                                 Consolidated     1,326,535       9.29 %     570,960       4.00 %     N/A       N/A   ServisFirst Bank     1,386,197       9.71 %     570,924       4.00 %     713,656       5 %                                                   As of June 30, 2022                                                 CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,220,160       9.64 %   $ 569,638       4.50 %     N/A       N/A   ServisFirst Bank     1,281,780       10.13 %     569,564       4.50 %   $ 822,703       6.50 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,220,660       9.64 %     759,517       6.00 %     N/A       N/A   ServisFirst Bank     1,282,280       10.13 %     759,419       6.00 %     1,012,558       8.00 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,415,363       11.18 %     1,012,690       8.00 %     N/A       N/A   ServisFirst Bank     1,412,267       11.16 %     1,012,558       8.00 %     1,265,698       10.00 % Tier 1 Capital to Average Assets:                                                 Consolidated     1,220,660       8.19 %     596,323       4.00 %     N/A       N/A   ServisFirst Bank     1,282,280       8.60 %     596,224       4.00 %     745,280       5.00 %   We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, are dividends the Bank pays to us as the Bank’s sole stockholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well  to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.   36     The Alabama Banking Department also regulates the Bank’s dividend payments. Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the Bank’s surplus is equal to at least 20% of its capital (our Bank’s surplus currently exceeds 20% of its capital). Moreover, our Bank is also required by Alabama law to obtain the prior approval of the Superintendent of Banks (“Superintendent”) for its payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (i) the Bank’s net earnings (as defined by statute) for that year, plus (ii) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends, withdrawals or transfers may be made from the Bank’s surplus without the prior written approval of the Superintendent.   The Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividends if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. If, in the opinion of the federal banking regulators, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulators could require, after notice and a hearing, that the Bank stop or refrain from engaging in the questioned practice.   Commitments and Contingencies   In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit, and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in our balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates.   Our exposure to credit loss in the event of non-performance by the other party to such financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of these instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.   As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers.   Financial instruments whose contract amounts represent credit risk at June 30, 2023 are as follows:       June 30, 2023       (In Thousands)   Commitments to extend credit   $ 3,805,399   Credit card arrangements     381,022   Standby letters of credit     66,430       $ 4,252,851     Commitments to extend credit beyond current funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.   Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.   37     Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.   Results of Operations   Summary of Net Income   Net income and net income available to common stockholders for the three months ended June 30, 2023 was $53.4 million compared to net income and net income available to common stockholders of $62.1 million for the three months ended June 30, 2022. Net income and net income available to common stockholders for the six months ended June 30, 2023 was $111.4 million compared to net income and net income available to common stockholders of $119.7 million for the six months ended June 30, 2022. For the three and six months ended June 30, 2023 compared to 2022 net interest income decreased $15.1 million, and $12.5 million, respectively. Net interest income was negatively impacted by the continued narrowing in net interest spread due to Federal Reserve increases in interest rates over the last year. The net interest spread in the second quarter of 2023 was 1.94% compared to 2.29% in the first quarter of 2023 and 3.08% in the second quarter of 2022. The decrease in net interest income for the three and six-month periods is primarily attributable to the rising costs associated with deposits.   Basic and diluted earnings per common share were both $0.98, for the three months ended June 30, 2023, compared to $1.14 for the corresponding period in 2022. Basic and diluted earnings per common share were $2.05 and $2.04, respectively, for the six months ended June 30, 2023, compared to $2.21 and $2.20, respectively, for the corresponding period in 2022. Return on average assets for the three and six months ended June 30, 2023 was 1.50% and 1.57% compared to 1.67% and 1.60%, respectively, for the corresponding periods in 2022. Return on average common stockholders’ equity for the three and six months ended June 30, 2023 was 15.85% and 16.83%, respectively, compared to 20.93% and 20.52%, respectively, for the corresponding periods in 2022.   Net Interest Income and Net Interest Margin Analysis   Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors which affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.   Taxable-equivalent net interest income decreased $15.2 million, or 13.0%, to $101.3 million for the three months ended June 30, 2023 compared to $116.5 million for the corresponding period in 2022, and decreased $12.7 million, or 5.7%, to $209.7 million for the six months ended June 30, 2023 compared to $222.3 million for the corresponding period in 2022. Noninterest-bearing demand deposit balances decreased by $1.95 billion and $1.87 billion for the three and six-month periods, respectively. A majority of these balances were moved into interest-bearing accounts as market interest rates increased during 2022. Rates paid on interest-bearing deposits also increased as discussed in more detail below. The taxable-equivalent yield on interest-earning assets increased to 5.49% for the three months ended June 30, 2023 from 3.54% for the corresponding period in 2022, and increased to 5.38% for the six months ended June 30, 2023 from 3.32% for the corresponding period in 2022.  The yield on loans for the three months ended June 30, 2023 was 5.94% compared to 4.38% for the corresponding period in 2022, and 5.82% compared to 4.36% for the six months ended June 30, 2023 and June 30, 2022, respectively.  The cost of total interest-bearing liabilities increased to 3.55% for the three months ended June 30, 2023 compared to 0.46% for the corresponding period in 2022, and increased to 3.27% for the six months ended June 30, 2023 from 0.40% for the corresponding period in 2022.  Net interest margin for the three months ended June 30, 2023 was 2.93% compared to 3.26% for the corresponding period in 2022, and 3.04% for the six months ended June 30, 2023 compared to 3.07% for the corresponding period in 2022.   Beginning in March of 2022, the Federal Reserve Bank increased their targeted federal funds rate from 0 – 0.25% to its current range as of June 30, 2023 of 5.00 – 5.25%. Our cost of funding has increased as a result of deposit pricing pressures resulting from these rate increases. We believe our net interest income will benefit over a short period of time following the Federal Reserve Bank’s ceasing these rate increases.   The following tables show, for the three and six months ended June 30, 2023 and June 30, 2022, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying tables reflect changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. The tables are presented on a taxable-equivalent basis where applicable:   38     Average Balance Sheets and Net Interest Analysis   On a Fully Taxable-Equivalent Basis   For the Three Months Ended June 30,   (In thousands, except Average Yields and Rates)                                                         2023     2022               Interest     Average             Interest     Average       Average     Earned /     Yield /     Average     Earned /     Yield /       Balance     Paid     Rate     Balance     Paid     Rate   Assets:                                                 Interest-earning assets:                                                 Loans, net of unearned income (1)(2):                                                 Taxable   $ 11,581,008     $ 171,474       5.94 %   $ 10,165,470     $ 111,086       4.38 % Tax-exempt (3)     18,312       220       4.82       23,616       241       4.09   Total loans, net of unearned income     11,599,320       171,694       5.94       10,189,086       111,327       4.38   Mortgage loans held for sale     5,014       64       5.12       471       4       3.41   Investment securities:                                                 Taxable     1,757,397       11,616       2.64       1,775,425       10,516       2.37   Tax-exempt (3)     2,960       18       2.43       7,148       42       2.35   Total investment securities (4)     1,760,357       11,634       2.64       1,782,573       10,558       2.37   Federal funds sold     15,908       227       5.72       30,721       93       1.21   Restricted equity securities     8,834       134       6.08       7,724       72       3.74   Interest-bearing balances with banks     460,893       5,989       5.21       2,332,412       4,623       0.80   Total interest-earning assets   $ 13,850,326     $ 189,742       5.49     $ 14,342,987     $ 126,677       3.54   Non-interest-earning assets:                                                 Cash and due from banks     101,188                       204,994                   Net fixed assets and equipment     60,499                       60,673                   Allowance for credit losses, accrued interest and other assets     279,860                       297,893                   Total assets   $ 14,291,873                     $ 14,906,547                                                                     Liabilities and stockholders' equity:                                           Interest-bearing liabilities:                                                 Interest-bearing demand deposits   $ 1,628,936     $ 6,853       1.69 %   $ 1,699,602     $ 891       0.21 % Savings deposits     122,050       421       1.38       134,469       61       0.18   Money market accounts     5,971,639       56,251       3.78       4,617,021       3,831       0.33   Time deposits     983,582       8,446       3.44       766,225       1,644       0.86   Total interest-bearing deposits     8,706,207       71,971       3.32       7,217,317       6,427       0.36   Federal funds purchased     1,191,582       15,270       5.14       1,550,805       3,070       0.79   Other borrowings     100,998       1,164       4.62       64,713       690       4.28   Total interest-bearing liabilities   $ 9,998,787     $ 88,405       3.55 %   $ 8,832,835     $ 10,187       0.46 % Non-interest-bearing liabilities:                                                 Non-interest-bearing demand deposits     2,876,225                       4,824,521                   Other liabilities     64,917                       58,784                   Stockholders' equity     1,399,578                       1,205,551                   Accumulated other comprehensive loss     (47,634 )                     (15,144 )                 Total liabilities and stockholders' equity   $ 14,291,873                     $ 14,906,547                   Net interest income           $ 101,337                     $ 116,490           Net interest spread                     1.94 %                     3.08 % Net interest margin                     2.93 %                     3.26 %   (1) Non-accrual loans are included in average loan balances in all periods. Loan fees of $3,318 and $5,303 are included in interest income in the second quarter of 2023 and 2022, respectively. Loan fees include accretion of PPP loan fees. (2) Amortization of acquired loan premiums of $49 and $38 is included in interest income in 2023 and 2022, respectively. (3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. (4) Unrealized losses of  $(65,826) and $(25,730) are excluded from the yield calculation in the second quarter of 2023 and 2022, respectively.   39         For the Three Months Ended June 30,       2023 Compared to 2022 Increase (Decrease) in Interest Income and Expense Due to Changes in:       Volume     Rate     Total       (In Thousands)   Interest-earning assets:                         Loans, net of unearned income                         Taxable   $ 17,016     $ 43,372     $ 60,388   Tax-exempt     (60 )     39       (21 ) Total loans, net of unearned income     16,956       43,411       60,367   Mortgages held for sale     57       3       60   Debt securities:                         Taxable     (108 )     1,208       1,100   Tax-exempt     (25 )     1       (24 ) Total debt securities     (133 )     1,209       1,076   Federal funds sold     (64 )     198       134   Restricted equity securities     17       117       62   Interest-bearing balances with banks     (6,310 )     7,676       1,366   Total interest-earning assets   $ 10,523     $ 52,614     $ 63,065                             Interest-bearing liabilities:                         Interest-bearing demand deposits   $ (39 )   $ 6,001     $ 5,962   Savings     (7 )     367       360   Money market accounts     1,445       50,975       52,420   Time deposits     587       6,215       6,802   Total interest-bearing deposits     1,986       63,558       65,544   Federal funds purchased     (869 )     13,069       12,200   Other borrowed funds     414       60       474   Total interest-bearing liabilities     1,531       76,687       78,218   Increase in net interest income   $ 8,992     $ (24,073 )   $ (15,153 )   Our growth in loans continues to drive favorable volume component change. The rate component was unfavorable as loan yields increased 156 basis points and average rates paid on interest-bearing liabilities increased 309 basis points. An increase in average equity contributed to a favorable volume component but was partially offset by a decrease in average non-interest-bearing deposits during the three months ended June 30, 2023 compared to the same period in 2022.   40     Average Balance Sheets and Net Interest Analysis   On a Fully Taxable-Equivalent Basis   For the Six Months Ended June 30,   (In thousands, except Average Yields and Rates)                                                         2023     2022               Interest                     Interest               Average     Earned /     Average     Average     Earned /     Average       Balance     Paid     Yield / Rate     Balance     Paid     Yield / Rate   Assets:                                                 Interest-earning assets:                                                 Loans, net of unearned income (1)(2):                                                 Taxable   $ 11,606,581     $ 335,049       5.82 %   $ 9,894,980     $ 213,978       4.36 % Tax-exempt (3)     18,643       386       4.18       24,401       502       4.15   Total loans, net of unearned income     11,625,224       335,435       5.82       9,919,381       214,480       4.36   Mortgage loans held for sale     3,278       88       5.41       698       9       2.60   Investment securities:                                                 Taxable     1,741,050       22,508       2.61       1,647,709       18,739       2.29   Tax-exempt (3)     3,369       46       2.75       7,975       97       2.45   Total debt securities (4)     1,744,419       22,554       2.61       1,655,684       18,836       2.29   Federal funds sold     33,121       841       5.12       23,719       106       0.90   Restricted equity securities     9,374       322       7       7,548       140       4   Interest-bearing balances with banks     485,524       11,863       5       2,981,541       6,427       3.32   Total interest-earning assets   $ 13,900,940     $ 371,103       5.38 %   $ 14,588,571     $ 239,998       3.32 % Non-interest-earning assets:                                                 Cash and due from banks     103,601                       140,124                   Net fixed assets and equipment     60,558                       60,940                   Allowance for credit losses, accrued interest and other assets     279,650                       305,683                   Total assets   $ 14,344,749                     $ 15,095,318                                                                     Liabilities and stockholders' equity:                                                 Interest-bearing liabilities:                                                 Interest-bearing demand deposits   $ 1,652,064     $ 12,004       1.47 %   $ 1,647,414     $ 1,668       0.20 % Savings deposits     128,326       733       1.15       135,004       120       0.18   Money market accounts     5,864,734       101,229       3.48       4,800,106       7,035       0.30   Time deposits     917,478       13,718       3.02       779,503       3,447       0.89   Total interest-bearing deposits     8,562,602       127,684       3.01       7,362,027       12,270       0.34   Federal funds purchased     1,289,854       31,273       4.89       1,585,217       4,003       0.51   Other borrowings     107,826       2,469       4.62       64,711       1,380       4.30   Total interest-bearing liabilities   $ 9,960,282     $ 161,426       3.27 %   $ 9,011,955     $ 17,653       0.40 % Non-interest-bearing liabilities:                                                 Non-interest-bearing demand deposits     2,981,512                       4,847,484                   Other liabilities     67,688                       59,199                   Stockholders' equity     1,379,196                       1,181,005                   Accumulated other comprehensive loss     (43,929 )                     (4,325 )                 Total liabilities and stockholders' equity   $ 14,344,749                     $ 15,095,318                   Net interest income           $ 209,677                     $ 222,345           Net interest spread                     2.11 %                     2.92 % Net interest margin                     3.04 %                     3.07 %   (1) Non-accrual loans are included in average loan balances in all periods. Loan fees of $6,581 and $12,126, are included in interest income in 2023 and 2022, respectively. Loan fees include accretion of PPP loan fees. (2) Amortization of acquired loan premiums of $98 and $70 is included in interest income in 2023 and 2022, respectively. (3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. (4) Unrealized losses of $(60,880) and $(6,411) are excluded from the yield calculation in 2023 and 2022, respectively.   41         For the Six Months Ended June 30,       2023 Compared to 2022 Increase (Decrease) in Interest Income and Expense Due to Changes in:       Volume     Rate     Total       (In Thousands)   Interest-earning assets:                         Loans, net of unearned income                         Taxable   $ 41,235     $ 79,836     $ 121,071   Tax-exempt     (119 )     3       (116 ) Total loans, net of unearned income     41,116       79,839       120,955   Mortgages held for sale     61       18       79   Debt securities:                         Taxable     1,104       2,665       3,769   Tax-exempt     (62 )     11       (51 ) Total debt securities     1,042       2,676       3,718   Federal funds sold     57       678       735   Restricted equity securities     36       146       182   Interest-bearing balances with banks     (9,546 )     14,982       5,436   Total interest-earning assets   $ 32,766     $ 98,339     $ 131,105                             Interest-bearing liabilities:                         Interest-bearing demand deposits   $ 5     $ 10,331     $ 10,336   Savings     (6 )     619       613   Money market accounts     1,899       92,295       94,194   Time deposits     711       9,560       10,271   Total interest-bearing deposits     2,609       112,805       115,414   Federal funds purchased     (882 )     28,152       27,270   Other borrowed funds     980       109       1,089   Total interest-bearing liabilities     2,707       141,066       143,773   Increase in net interest income   $ 30,059     $ (42,727 )   $ (12,668 )   The increase in our loan portfolio is positively impacting the volume component. However, the rate component has been negatively impacted by an increase of 287 basis points in the average rates paid on interest-bearing liabilities, partially offset by a rise in loan yields of 146 basis points. An increase in average equity contributed to a favorable volume component but was partially offset by a decrease in average non-interest-bearing deposits during the six months ended June 30, 2023 compared to the same period in 2022.   Provision for Credit Losses   The provision for credit losses was $6.7 million for the three months ended June 30, 2023, a decrease of $2.9 million from $9.5 million for the three months ended June 30, 2022, and was $10.9 million for the six months ended June 30, 2023, a $4.0 million decrease compared to $14.9 million for the six months ended June 30, 2022. Due to the rising interest rate climate, management anticipates a slower pace in loan growth compared to the historical average. The decrease in provision expense is primarily attributable to this slower forecasted growth of the budgeted loan portfolio within the ACL model. The ACL for June 30, 2023 and December 31, 2022 was $152.2 million and $146.3 million, or 1.31% and 1.25% of loans, net of unearned income, respectively. Annualized net credit charge-offs to quarter-to-date average loans were 0.11% for the three months ended June 30, 2023, compared to annualized net credit recoveries to quarter-to-date average loans of 0.02% for the same period in 2022. Annualized net credit charge-offs to year-to-date average loans were 0.06% for the six months ended June 30, 2023, compared to 0.04% for the corresponding period in 2022.  Nonperforming loans increased to $21.5 million, or 0.19% of total loans, at June 30, 2023 from $17.8 million, or 0.15% of total loans, at December 31, 2022, and were $15.5 million, or 0.15% of total loans, at June 30, 2022. See the section captioned “Asset Quality” located elsewhere in this item for additional discussion related to provision for credit losses.   42     Noninterest Income       Three Months Ended June 30,                     Six Months Ended June 30,                       2023     2022     $ change     % change     2023     2022     $ change     % change   Noninterest income:                                                                 Service charges on deposit accounts   $ 2,142     $ 2,133     $ 9       0.4 %   $ 4,076     $ 4,275     $ (199 )     (4.7 )% Mortgage banking     696       614       82       13.4 %     1,138       1,140       (2 )     (0.2 )% Credit card income     2,406       2,672       (266 )     (10.0 )%     4,095       5,044       (949 )     (18.8 )% Securities losses     -       (2,833 )     2,833       - %     -       (6,168 )     6,168       (100.0 )% Increase in cash surrender value life insurance     2,496       3,733       (1,237 )     (33.1 )%     4,117       5,341       (1,224 )     (22.9 )% Other operating income     842       3,187       (2,345 )     (73.6 )%     1,477       7,822       (6,345 )     (81.1 )% Total non-interest income   $ 8,582     $ 9,506     $ (924 )     (9.7 )%   $ 14,903     $ 17,454     $ (2,551 )     (14.6 )%   Noninterest income totaled $8.6 million for the three months ended June 30, 2023, a decrease of $924,000 compared to the corresponding period in 2022, and totaled $14.9 million for the six months ended June 30, 2023, a decrease of $2.6 million, or 14.6%, compared to the corresponding period in 2022. Mortgage banking income increased $82,000, or 13.4%, to $696,000 for the three months ended June 30, 2023 compared to $614,000 for the same period in 2022, and decreased  $2,000, or 0.2%, to $1.1 million for the six months ended June 30, 2023 compared to $1.1 million for the same period in 2022. Net credit card income decreased $266,000 to $2.4 million for the three months ended June 30, 2023 compared to the same period in 2022, and decreased $949,000 to $4.1 million for the six months ended June 30, 2023 compared to the same period in 2022. Bank-owned life insurance (“BOLI”) income decreased $1.2 million, or 33.1%, to $2.5 million during the three months ended June 30, 2023, compared to the corresponding period in 2022, and decreased $1.2 million, or 22.9%, to $4.1 million for the six months ended June 30, 2023 compared to $5.3 million for the same period in 2022. During the second quarter of 2023, we recognized $890,000 of income primarily attributed to a death benefit related to a former employee in our BOLI program, compared to $2.1 million during the second quarter of 2022. Other income decreased $2.3 million, or 73.6%, to $842,000 for the three months ended June 30, 2023 compared to $3.2 million for the same period in 2022, and decreased $6.3 million, or 81.1%, to $1.5 million for the six months ended June 30, 2023 compared to $7.8 million for the same period in 2022. We recognized income on an interest rate cap of $48,000 for both the second quarter and year-to-date 2023 compared to income of $2.2 million during the second quarter of 2022 and $5.3 million year-to-date 2022. The interest rate cap terminated during the second quarter of 2023. Merchant service revenue increased $110,000, or 23.5%, to $581,000 during the three months ended June 30, 2023, compared to the corresponding period in 2022, and increased $229,000, or 28.3%, to $1.0 million for the six months ended June 30, 2023 compared to $807,000 for the same period in 2022. We recognized a $2.8 million loss on the sale of available for sale debt securities during the second quarter of 2022.   Noninterest Expense       Three Months Ended June 30,                     Six Months Ended June 30,                       2023     2022     $ change     % change     2023     2022     $ change     % change   Noninterest expense:                                                                 Salaries and employee benefits   $ 18,795     $ 20,734     $ (1,939 )     (9.4 )%   $ 37,861     $ 39,035     $ (1,174 )     (3.0 )% Equipment and occupancy expense     3,421       2,983       438       14.7 %     6,856       5,916       940       15.9 % Third party processing and other services     6,198       6,345       (147 )     (2.3 )%     13,482       11,950       1,532       12.8 % Professional services     1,580       1,327       253       19.1 %     3,234       2,319       915       39.5 % FDIC and other regulatory assessments     2,242       1,147       1,095       95.5 %     3,759       2,279       1,480       64.9 % OREO expense     6       32       (26 )     (81.3 )%     12       35       (23 )     (65.7 )% Other operating expense     6,224       7,253       (1,029 )     (14.2 )%     12,926       15,505       (2,579 )     (16.6 )% Total non-interest expense   $ 38,466     $ 39,821     $ (1,355 )     (3.4 )%   $ 78,130     $ 77,039     $ 1,091       1.4 %   Noninterest expense totaled $38.5 million for the three months ended June 30, 2023, a decrease of $1.4 million, or 3.4%, compared to $39.8 million for the same period in 2022, and totaled $78.1 million for the six months ended June 30, 2023, an increase of $1.1 million, or 1.4%, compared to $77.0 million for the same period in 2022.   Details of expense are as follows:     ● Salary and benefit expense decreased $1.9 million, or 9.4%, to $18.8 million for the three months ended June 30, 2023, from $20.7 million for the same period in 2022, and decreased $1.2 million, or 3.0%, to $37.9 million for the six months ended June 30, 2023 from $39.0 million for the same period in 2022. The number of FTE employees increased from 540 as of June 30, 2022, to 577 as of June 30, 2023. The increased costs from the modest headcount expansion were offset by a reduction in incentive expense.   ● Equipment and occupancy expense increased $438,000, or 14.7%, to $3.4 million for the three months ended June 30, 2023 from $3.0 million for the corresponding period in 2022, and increased $940,000, or 15.9%, to $6.9 million for the six months ended June 30, 2023 compared to $5.9 million for the corresponding period in 2022. The year-over-year increase is primarily attributed to new leases that commenced after the second quarter of 2022.   43       ● Third party processing and other services decreased $147,000, or 2.3%, to $6.2 million for the three months ended June 30, 2023, from $6.3 million for the corresponding period in 2022, and increased $1.5 million, or 12.8%, to $13.5 million for the six months ended June 30, 2023 compared to $12.0 million for the corresponding period in 2022. Third party processing and other services also includes Federal Reserve Bank charges related to correspondent bank settlement activities.   ● FDIC and other regulatory assessments increased $1.1 million, or 95.5%, to $2.2 million for the three months ended June 30, 2023 from $1.1 million for the corresponding period in 2022, and increased $1.5 million, or 64.9%, to $3.8 million for the six months ended June 30, 2023 compared to $2.3 million for the corresponding period in 2022. The FDIC increased the assessment rate by two basis points beginning in the first quarter of 2023.   ● OREO expense decreased $26,000, or 81.3%, to $6,000 for the three months ended June 30, 2023 from $32,000 for the corresponding period in 2022, and decreased $23,000, or 65.7%, to $12,000 from $35,000 for the six months ended June 30, 2023 compared to the corresponding period in 2022.   ● Other operating expenses decreased $1.0 million, or 14.2%, to $6.2 million for the three months ended June 30, 2023, from $7.3 million for the corresponding period in 2022, and decreased $2.6 million, or 16.6%, to $12.9 million from $15.5 million for the six months ended June 30, 2023 compared to the corresponding period in 2022.   Income Tax Expense   Income tax expense was $11.2 million for the three months ended June 30, 2023 compared to $14.4 million for the same period in 2022, and was $24.0 million for the six months ended June 30, 2023, compared to $27.9 million for the same period in 2022. Our effective tax rate for the three and six months ended June 30, 2023 was 17.38% and 17.74%, respectively, compared to 18.83% and 18.89% for the corresponding periods in 2022, respectively. We recognized $3.8 million and $7.4 million in federal new markets tax credits during the three and six months ended June 30, 2023, respectively, compared to $3.1 million and $6.3 million during the same periods in 2022, respectively. We recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during the three and six months ended June 30, 2023 of $138,000 and $1.2 million, respectively, compared to $352,000 and $924,000 during the three and six months ended June 30, 2022, respectively. Our primary permanent differences are related to tax exempt income on securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance.   We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are wholly-owned subsidiaries of a trust holding company, which in turn is an indirect wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.   Critical Accounting Estimates   The accounting and financial policies of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. In management’s opinion, certain accounting policies have a more significant impact than others on the Company’s financial reporting. The allowance for credit losses and income taxes are particularly significant for the Company’s financial reporting. Information concerning our accounting policies and critical accounting estimates with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There were no changes to the accounting policies for the allowance for credit losses or income taxes during the three and six months ended June 30, 2023.   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Like all financial institutions, we are subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.   44     To manage interest rate risk, we must take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet. Our annual budget reflects the anticipated rate environment for the next 12 months. The asset-liability committee conducts a quarterly analysis of the rate sensitivity position and reports its results to our board of directors.   The asset-liability committee thoroughly analyzes the maturities of rate-sensitive assets and liabilities. This analysis measures the “gap”, which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. The gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities. If the ratio is greater than one, the dollar value of assets exceeds the dollar value of liabilities; the balance sheet is “asset-sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less than one and the balance sheet is “liability-sensitive.” Our internal policy requires management to maintain the gap such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest rates change 200 basis points. There have been no changes to our policies or procedures for analyzing our interest rate risk since December 31, 2022, and there have been no material changes to our sensitivity to changes in interest rates since December 31, 2022, as disclosed in our Annual Report on Form 10-K.   ITEM 4. CONTROLS AND PROCEDURES   CEO and CFO Certification .   Appearing as exhibits to this report are Certifications of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required to be made by Rule 13a-14 or Rule 15d-14 under the Securities Exchange Act of 1934. This item contains the information about the evaluation that is referred to in the Certifications, and the information set forth below in this Item 4 should be read in conjunction with the Certifications for a more complete understanding of the Certifications.   Evaluation of Disclosure Controls and Procedures.   We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.   We conducted an evaluation (the "Evaluation") of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our CEO and CFO, as of June 30, 2023. Based upon the Evaluation, our CEO and CFO have concluded that, as of June 30, 2023, our disclosure controls and procedures are effective to ensure that material information relating to the Company. and its subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.   Changes in Internal Control Over Financial Reporting   There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS   From time to time we may be a party to various legal proceedings arising in the ordinary course of business. Management does not believe the Company or the Bank is currently a party to any material legal proceedings.   45     ITEM 1A. RISK FACTORS   Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified a number of these risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.   ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   None.   Our Board of Directors declared the following dividends during the second quarter of fiscal year 2023:   Declaration Date Record Date Payment Date Dividend per Share Amount (in thousands) June 20, 2023 July 3, 2023 July 10, 2023 $0.28 $15,239   Refer to the “Capital Adequacy” section within Management’s Discussion and Analysis in Part I, Item 2 for information regarding the Company’s dividend policy and restrictions on payment of dividends.   ITEM 3. DEFAULTS UPON SENIOR SECURITIES   None.   ITEM 4. MINE SAFETY DISCLOSURES   Not applicable.     ITEM 5. OTHER INFORMATION   (a)           On April 17, 2023, the Company held its Annual Meeting of Stockholders. At this meeting, the stockholders approved a second amendment to the Restated Certificate of Incorporation of the Company (the “Restated Certificate of Incorporation”) to include new Delaware law provisions with respect to officer exculpation. On April 24, 2023, the Company filed the Second Certificate of Amendment to its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, reflecting the approved officer exculpation provisions.   (b)           The Company did not implement any material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors during the quarter ended June 30, 2023.   (c)           None of the Company’s directors or officers adopted or terminated any Rule 10b5 - 1 or non- 10b5 - 1 trading arrangements during the quarter ended June 30, 2023.   ITEM 6. EXHIBITS   (a) Exhibit:   Exhibit: Description 3.1 Second Certificate of Amendment to the Restated Certificate of Incorporation. 3.2 Restated Certificate of Incorporation, as amended (Restated for SEC filing purposes only.) 3.3 Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed June 24, 2016). 3.4 First Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.01 to the Company’s Quarterly Report on Form 10-Q, filed July 29, 2022). 3.5 Certificate of Elimination of the Senior Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to the Company’s Current Report on Form 8-K/A, filed June 28, 2016). 31.01 Certification of principal executive officer pursuant to Rule 13a-14(a). 31.02 Certification of principal financial officer pursuant to Rule 13a-14(a). 32.01 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350. 32.02 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   * denotes management contract or compensatory plan or arrangement   46     SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.       SERVISFIRST BANCSHARES, INC.                 Date: August 2, 2023                            By        /s/ Thomas A. Broughton III        Thomas A. Broughton III       President and Chief Executive Officer                   Date: August 2, 2023                            By        /s/ William M. Foshee       William M. Foshee       Chief Financial Officer                 47